An outdated and complex funding model is hindering councils’ ability to plan effectively and meet the growing needs of their communities, according to a new report.
‘Reforming the local government funding system in England’, from the LGA, the Society of Local Authority Chief Executives and Senior Managers, and the Chartered Institute of Public Finance and Accountancy, says the local government funding system needs urgent reform.
It urges the Government to consider immediate interventions to address systemic issues, including the introduction of timely, multi-year financial settlements for councils – which the Government has promised from 2026 – and more clarity on system reform, including a review of the data and formulae underlying the funding allocation model.
This needs to be alongside a full-scale, cross-party government review on options to improve the local government funding system, as the current model is out of date, complex and opaque. The review should also look at the future of council tax and business rates retention.
Cllr Pete Marland, Chair of the LGA’s Economy and Resources Board, said: “Councils need a significant and sustained increase in overall funding to meet the requirements being placed on them, but this alone will not address the multiple issues with the current funding system.
“Creating an improved and more sustainable system for local government has the potential to strengthen the value for money of local spending and, most importantly, improve services for communities.”