Councils need more funding to provide vital local services
To unlock the full potential of councils to support local communities and help deliver the Government’s reform and growth agenda, the sector needs sufficient and sustainable funding.
Over the long term, there also needs to be a review of, and reform to, the overall revenue funding system for councils.
So says the LGA’s submission to the Treasury ahead of the Government’s Spending Review due on 11 June. The submission highlights the fundamental challenges facing councils in England, including that cost and demand pressures are rising faster than funding.
While inflation has fallen since its peak in 2022/23, the sector is still grappling with the huge resulting uplift in its cost base. Councils also continue to face wage pressures driven by increases in the National Living Wage, and recent changes to employer National Insurance contributions (NICs) rates and thresholds.
While the Government has provided £515 million for the direct costs to local authorities’ wage bills associated with the NICs changes, the LGA estimates the direct costs will be £637 million, plus up to £1.1 billion in indirect costs from providers of outsourced or contracted-out services.
In addition to these economy-wide inflationary and wage pressures, there are individual service areas with cost and demand dynamics that are exerting higher cost pressures. These include children’s social care, home-to-school transport for children with special educational needs and disabilities (SEND), adult social care, and homelessness services.
LGA analysis suggests councils could face a funding gap of more than £8 billion by 2028/29 without adequate additional funding. If current cost and demand trends continue, by the end of 2028/29 these pressures would add £21.4 billion to the bill for council services since 2024/25 – a 29.8 per cent increase in service costs.
Without urgent action in the Spending Review, not only will many councils face impossible choices on which desperately needed services they can provide in the future, but the opportunity to boost growth and reform may also be missed.
The Spending Review’s commitment to delivering public service reform to manage cost and demand pressures and deliver greater value for money, particularly in areas such as children’s social care and SEND, will be crucial.
The sector is keen to work with the Government on service reform, and much of the LGA’s submission focuses on this issue (see right). But reform alone will not address the scale of the cost and demand pressures faced by the sector, and there is genuine need for a larger funding quantum.
Local government finances
To fix the financial foundations of local government, councils need:
- a sustained increase in funding that recognises growing cost pressures across service areas
- sufficient additional funding to cover increases in the National Living Wage and changes to employer National Insurance contributions
- a review of the efficacy of Exceptional Financial Support
- a cross-party review of local government funding, including council tax and business rates
- consideration of alternative and additional forms of council funding
- the timely and transparent delivery of current commitments to finance reform, with proper transition arrangements.
Barriers to opportunity
Council support for children, young people and families is central to the Government’s mission to remove barriers to opportunity. This requires:
- a new cross-government strategy to ensure all partners are working towards a shared ambition
- reform and long-term investment to address challenges facing council-backed services, including preventative services and placements for children in care
- urgent reform of the SEND system, with a focus on raising levels of mainstream inclusion
- the writing off of all ‘high needs’ SEND Dedicated Schools Grant deficits
- a nationwide rollout of family hubs and further investment in child health services
- sufficient powers, resources and levers for councils’ statutory duty to ensure that families have access to high-quality early education and childcare.
Technology-led reform
To unlock the potential of a digitally enabled local government sector, the LGA wants:
- government to work with it to create a dedicated ‘Local Government Centre for Digital Technology’ within the LGA
- the Department for Science, Innovation and Technology to work with it to address challenges to digital inclusion and connectivity, and empower communities digitally.
Kickstart growth
As leaders of place and as major local employers, councils have a critical and unique role in unlocking inclusive and sustainable growth. The LGA is calling for:
- sufficient funding and flexibility so that all councils, including those in combined or strategic authority areas, can lead local growth priorities
- greater fiscal decentralisation, including mechanisms such as a tourist levy
- long-term consolidated investment in local transport infrastructure
- a stronger partnership with our members to deliver Get Britain Working White Paper reforms
- housing reforms, including on Right to Buy and homelessness
- actions to strengthen housing revenue accounts
- continued investment in the One Public Estate programme, Brownfield Land Release Fund and the Local Authority Housing Fund
- funding for a new, multi-year, council housebuilding, sector-led support programme
- uprating of temporary accommodation subsidy rates
- a sustainable funding model for the delivery of supported housin
Public sector reform
Councils should be central to these important reforms, as there is clear evidence of the strong value for money of their preventative services. The LGA is calling for:
- investment in ‘test and learn’ approaches, workforce, and sector-led improvement
- recognition of the important connection between councils and the voluntary sector
- adequate resources for councils’ long-term role in the welfare system, including a planned replacement for the Household Support Fund
- restoration of the public health grant to 2015/16 levels, with a review of its distribution and year-on-year increases.
Green energy
To accelerate towards net zero, the Government should adopt a comprehensive long-term, place-based strategy that reforms funding, planning and delivery to unlock the potential of councils as leaders and conveners, with housing, planning, waste and transport powers. This includes:
- consolidating and devolving funds from existing schemes into a Warm Homes Plan that delivers long-term investment in retrofit and a Local Power Plan that will scale community energy projects
- national backing of local transport decarbonisation plans, including demand-management schemes
- a rapid review of plans for the Emissions Trading Scheme extension to waste, to protect local services
- designing out carbon use across the economy
- integrating climate resilience into policymaking, supporting nature recovery and providing flexible flood-defence funding.
NHS and social care
Effective NHS reform cannot be realised without an equivalent, clear and urgent plan for adult social care reform, which tackles immediate pressures and their consequences as well as longer-term questions such as who pays for care. It also requires:
- place-based, personalised health services that address the root causes of health inequalities
- an immediate funding injection to stabilise the adult social care system
- scaled-up investment in tech-enabled care, particularly for those on lower incomes
- investment in adult social care prevention trailblazers, and funding for independent evaluation of existing and future preventative interventions
- funding and support to deliver the recommendations of the Skills for Care workforce strategy
- paid leave for unpaid carers.
Safer streets
Councils play a crucial role in promoting community cohesion, reducing reoffending, combating antisocial behaviour, tackling knife crime and countering extremism. But councils need:
- resources, alongside reform of the partnership landscape, to best deliver their role
- a long-term, unified funding stream for community safety, directly allocated to councils or community safety partnerships (CSPs)
- adequate powers for CSPs
- funding for preventative services to address childhood adversity and poor mental health.
- This is a summary of the LGA’s submission to the 2025 Spending Review.