Counties voice concern as council funding shake-up announced
The “outdated and inefficient” system of funding councils will be replaced by a fairer process focused on the needs of communities, the Government has said.
The announcement coincides with the publication of the provisional local government financial settlement for 2026-26, which includes a £600 million recovery grant for councils in deprived areas and an increase in social care funding of £680 million.
A children’s social care grant will provide £250 million for preventative initiatives, while the Government has confirmed it will maintain the threshold for council tax increases at a maximum of 4.99% without the need for a local referendum.
The funding outlined is a combination of measures in the autumn budget and “repurposed funds”, including grants for councils serving rural communities, the Government said.
A consultation on funding reform will be launched next month with a focus on what the Government said will be a move away from “an outdated and inefficient approach, which has seen some councils increasing their level of reserves and others struggling to deliver services and balance budgets, and shifting to a fairer system which matches funding with need”.
It is claimed the changes will build on “lessons learned” from the previous Government’s fair funding review, which many councils hoped would address the variation in the amount of revenue councils could raise to fund services through council tax, but was not implemented.
Planned reforms will be implemented alongside multi-year funding settlements, which have not been provided since the middle of the last decade, the Government said.
Deputy Prime Minister Angela Rayner said: “For too long councils have been let down by an outdated and inefficient funding system which has led to public services creaking and taxpayers’ money not being spent efficiently.
“Whilst there’s no magic wand to fix what we’ve inherited, we’re taking the necessary steps to fix the foundations of local government by creating a fairer system and ensuring every penny is spent on the services so many people rely on every day.”
However, the County Councils Network (CCN) said that “at first glance” the way the Government intends to distribute resources is a concern.
CCN chairman Tim Oliver said: “Considering that increases in the minimum wage and national insurance contributions will more than wipe out extra funds for social care, it is possible most CCN member councils, and many more across the country, will receive nothing from the ‘recovery grant’ which will be heavily targeted and weighted exclusively by deprivation.
“We are also very disappointed that the Government have chosen to repurpose some grants and redistribute this funding elsewhere, which will adversely impact rural councils.”