Councils fear loss of 100,000 jobs from £2bn funding black hole

Local government chiefs warn of threat of mass redundancies after George Osborne announces budget cuts of 28%

Council chiefs warned today they will be forced to shut libraries, cancel road repairs, close youth clubs and lay off 100,000 people as they claimed to have identified a £2bn black hole in the government’s spending plans.

Lady Eaton, chair of the Local Government Association, told council leaders in London that they would have to consider all options – from charging more for meals on wheels to mass redundancies – after the chancellor, George Osborne, announced a 28% cut to the local authorities’ budget by 2014-15.

“These cuts will hurt. We know this means there will be fewer libraries, more potholes going unrepaired, parks shutting earlier and youth clubs closing,” she said. “Our estimate is up to 100,000 jobs in local authorities will go. That’s one in 10 of the workforce. Of course we’ll try and do this as flexibly and sympathetically as we can. Some jobs will go in natural wastage, not filling vacancies and voluntary redundancy. But there will be job losses where real people dedicated in their profession won’t be there any more.”

The LGA said the government was underestimating soaring demands for social care for older people and for child protection, the latter bearing the brunt of cuts at the Department for Education after schools were protected. The coalition has said frontline services should be safeguarded from the cuts, but councils now believe that to be impossible.

The local government minister, Grant Shapps, said councils should consider cutting salaries and sacking people in what he described as “non-jobs” before they cut frontline services.

Analysis by the LGA reveals that the Treasury has allocated £21.9bn for the 2014-15 formula grant, which the Treasury redistributes from the central pot of business rates collected from every local authority. According to the association’s estimates, councils will collect £24.1bn that year and by law the Treasury has to give it all back. If the chancellor sticks to its plan to redistribute only £21.9bn it leaves a £2.2bn hole in their spending. “It will keep Treasury lawyers very busy,” one official at the association said.

According to a letter sent yesterday to local authorities by the communities secretary, Eric Pickles, while currently the entire formula grant is made up of the business rates, from next year it will be supplemented with other grants that are awarded to tackle homelessness, provide shelters for abused women and pay for nationwide free travel for concessionary groups. It could amount to a Treasury raid on business rates.

The cuts are front-loaded so councils will have to make the largest reductions in the first year of the spending review, meaning that redundancies and cuts to whole services could be the only way to stay within budget.

Many local authorities have already embarked on mass redundancies to build up reserves this year to ease the pain of the next four, the LGA confirmed.

Doncaster council has announced plans for 800 job cuts, Coventry is seeking 1,000 voluntary redundancies and Sheffield has issued preliminary notices to 8,500 staff after a similar warning by Birmingham to 26,000 staff. Shropshire has floated the idea of bussing pensioners to schools for dinners, instead of providing meals on wheels.

Shapps said: “This was a tough but fair settlement. We are giving councils more control over their budgets so they can protect frontline services. However, in order to achieve this they must cut out the waste and crazy non-jobs, start sharing back-office services and join forces to procure to benefit from economies of scale.

“Everyone should do their bit which means bringing senior pay under control and chief execs taking a pay cut.”