Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 12
12
Deferred
Over-reliance on ringfenced funding reduces local authority efficiency and decision-making.
Conclusion
Successive Governments have relied too much on ringfencing of funding to control the activities of local government. Through ringfencing, the Government has required local authorities to spend their money in specified ways, which may not be the most efficient use of that money in the local context. Local authorities would be able to make more use of their local knowledge and make better decisions within their local context if the Government used an outcomes-based system: rather than requiring local authorities to spend specific amounts of money in certain ways, requiring local authorities to achieve certain outcomes within their overall budget. (Conclusion, Paragraph 61)
Government response summary AI-generated
The government's response focused on the roles of various departments in the local tax system and plans to move the Valuation Office Agency into HMRC, without addressing the recommendation to move away from ringfencing to an outcomes-based system.
Summary of the government's response below — read the verbatim text to verify.
Government Response
Deferred
HM Government · verbatim extract
Deferred
28. The Government recognises that greater flexibility for local decision-making is critical to the sustainability of local government. 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, focused on the impact of spending on local communities rather than micro-control of ringfenced grants. 29. Following a period of engagement with the local government sector, the final Framework will be published alongside the provisional Local Government Finance Settlement for 2026–27. We expect that from April 2026, government will actively use the Framework to support delivery and, where necessary, take action in response to poor public service outcomes for local people. 30. A full transition to outcomes-based accountability will require a significant cultural shift across central and local government and our work will continue beyond April 2026. This includes working across government to move further away from using ringfences and other reporting requirements, and working with local government to ensure outcomes-based accountability is implemented in a way that genuinely supports councils to improve outcomes for local people. 31. We know that previous governments increasingly relied on ringfenced micro-grants to deliver departmental priorities. This Government recognises that this fragmented, restrictive funding system is not sustainable. In 2025–26 we consolidated almost £700m into the LGFS. We are going further and faster for 2026–27 and will deliver the biggest programme of funding simplification to date. 32. As laid out in the FFR 2.0 consultation, the Government intends to bring together grants from across government into large ringfenced consolidated grants, delivered as part of the Settlement. This will provide multi-year certainty over as much funding as possible, and reduce the late announcement of funding throughout the financial year. Many of these large grants will be structured to support prevention and service reform, as well as encouraging closer working across departments. Wherever possible, we will also roll suitable grants into the Revenue Support Grant, reducing the complexity of the funding landscape and number of micro grants local authorities currently have to manage.
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