Government warned over funding crisis for councils as Babergh sets budget to protect services

On Wednesday evening, Babergh District Council agreed a 2.99% increase to its share of council tax bills – 11p extra a week for Band D homes – but also spelt out the major financial challenges faced by many authorities.

Councillors said the budget would help protect services while offering excellent value for money – with people paying less than the cost of a coffee for the district’s services each week.

Babergh keeps less than 10% of the total council tax bill, with the rest going to Suffolk County Council, the Police and Crime Commissioner, and town and parish councils.

In 2025/26, Babergh’s element of the bill for a Band D home will rise from £188.10 a year to £193.73.

This is the equivalent of £3.72 a week for all district council services - including waste collection, planning, maintaining green spaces, supporting the local economy, culture and communities, and helping those at risk of homelessness.

Despite making savings or additional income totalling £2.6million, the council had to use £633k from its financial resilience reserve to plug a budget gap.

It still faces a budget shortfall of £14.6m over the six years from 2024/5 to 2029/30 – and is due to run out of useable reserves at its current rate by 2028/29.

Cabinet member for finance, assets and investments, Cllr John Ward, said:

“Babergh is continuing to take a planned, prudent approach to protect vital services and deliver outstanding value for money.

“However, we and many other councils continue to face serious financial challenges and are having to make increasingly difficult decisions. Government funding has not kept up with the costs we face and the demand for services that our communities rely on. 

“The proposed reorganisation of local government, which will see the creation of unitary councils, responsible for all council services, must not distract from the financial pressures which are pushing councils to the edge.”

The net cost of providing Babergh’s services to residents and communities, after income and the use of earmarked reserves are taken into account, will rise by 8% to just over £15m in the next year.

The budget report also notes how the Government’s sudden removal of the Rural Services Delivery Grant just before Christmas, without notice, left a £308,000 gap in Babergh’s budget.

According to statistics from the Local Government Association, one in four councils in England are likely to have to apply for emergency Government bailout agreements to stave off ‘bankruptcy’ in the next two financial years.

Council leader Cllr Deborah Saw said:

“Successive governments have underfunded rural councils, leaving our communities at a disadvantage. Rural residents also pay, on average, 20% more per head in Council Tax because their local council gets less government grant. To make matters worse, council services cost more to deliver in rural areas; residents are spread across large areas yet are still in need of vital services. 

“Rural residents deserve their fair share of the funding pot to ensure functioning and sustainable communities, especially given the cost-of-living crisis.

“If the Government thinks local government reform alone will solve the council funding crisis, then I think they are wrong. I do not believe there is any evidence to suggest that creating larger council structures that are more remote from residents will deliver better services more cheaply.”