Recommendation 5

HM Government Accepted

The Government recognises the importance of taking a cross-government approach to local government financial sustainability and towards enabling the delivery of services provided by local government. At the 2025 Spending Review, the government announced an ambitious programme of public service reform – which included providing funding to reform key local authority services such as children’s social care and the special educational needs and disabilities (SEND) system. In addition to this, MHCLG is co-ordinating work across government on our programme of local government finance reform, as set out in the FFR 2.0 consultation. This includes close cross-government working on an up-to-date assessment of local need across service areas. Subject to consultation, we will implement this updated assessment alongside a range of other proposals as part of the first multi-year Settlement in a decade. MHCLG is also working across government on a programme of funding simplification, with the aim of improving the fragmented way grant funding is currently allocated and paid to local government. Where possible, we are rolling smaller grants directly into the Revenue Support Grant in the LGFS. For larger grants, we have grouped them by service area into ringfenced funding pots. We have agreed with Government departments that they will retain policy responsibility and levers, but where the funding is based on the Local Government Departmental Expenditure Limit (LG DEL) the MHCLG Permanent Secretary will take Accounting Officer responsibility. The FFR 2.0 consultation set out our approach to funding simplification and we will set out further detail at the provisional Settlement later this year. Alongside the Government’s collective plan for reforming public services and the local government finance system, we are also ensuring there is clear accountability and transparency over public spending through a greater focus on outcomes on the ground and not micromanaging inputs. In this respect, the former Deputy Prime Minister announced the LGOF on 3 July 2025, setting the direction of travel towards outcome-based accountability for councils in England. The LGOF sets out 15 collectively agreed priority outcomes central government wants to work with local government on to deliver key national goals and measure progress. Through LGOF and other initiatives, such as reviewing the Single Data List, we are working across government to improve shared accountability and strengthen the link between funding, oversight, and the outcomes we want to see for citizens and communities. As set out in the FFR 2.0 consultation, the Government recognises that local authorities must balance the need to raise income to provide certain services via sales, fees and charges, with protecting service users from disproportionate costs. We recognise that a number of significant sources of fee revenue are set by central Government, and have not been adjusted in line with inflation for a number of years or decades. We will be setting out more about our proposed approach to reviewing the current sales, fees and charges system, in a proportionate way, in the consultation response in the Autumn. Furthermore, a regular cross-departmental review group provides intelligence and views which inform MHCLG’s review of local government performance and achievement of Best Value Duty. This contributes to early MHCLG engagement and informed decisions on the most appropriate and proportionate level of intervention.