Final settlement is a huge leap forward

Posted on February 26, 2025

February is shaping up to be a hugely consequential month for local government finance. The first major part was the publication of the final local government finance settlement. This confirmed the major elements set out in the provisional settlement including the extremely welcome £600m Recovery Grant, the vital new Children's Social Care Prevention Grant funding and the repurposing of other grant funding, including the poorly-targeted Rural Services Delivery Grant.

Our analysis shows the most deprived decile of councils received an overall increase around double that of the least deprived decile. After 14 years when the opposite has happened, this is welcome indeed.

However, the scale of the issue at hand was revealed by the number of local authorities that requested additional council tax flexibilities and exceptional financial support.

"We have called for full equalisation of council tax to ensure that grant funding levels fully reflect an area's ability to raise local income"

The settlement contained significant new funding for councils, but rising demand on services and pressures on pay mean the quantum of funding for local government still remains insufficient. This is something we made clear in our submission to the Spending Review consultation.

The other main issue is that the overall distribution of funding is poor, despite the improvement following the settlement.

As the department has stated, this is an inefficient allocation of resources. Money does not go to places that need it most, impacting on the delivery of services many communities rely on.

It is very welcome that the Government is finally undertaking a fundamental review of needs and resources and has already carried out the first of two major consultations, alongside extensive consultation with the sector.

We have also strongly welcomed the direction of travel the department has signalled.

We have called for full equalisation of council tax to ensure that grant funding levels fully reflect an area's ability to raise local income. We understand the need for a transition period, but have called for one that is not excessive and ensures areas in desperate need of funding receive the funding they deserve in good time. And, we have provided evidence of why deprivation is a significant driver of cost and demand for services and should play an important role in the new funding formulae.

By focusing funding on need, the final settlement was a huge step in the right direction, undoing some of the damage of the last 14 years. The funding review should build on this to ensure that the multi-year settlement delivers a period of sustainable, stable and sufficient funding for local government.

Read the piece in the MJ, here.