Select committee: Housing, Communities and Local Government Committee
Recommendation 43
2nd Report - The Funding and Sustainability of Local Government Finance
Published 23 Jul 2025
Addressed to Ministry of Housing, Communities and Local Government
Housing, Communities and Local Government Committee The Funding and Sustainability of Local Government Finance All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Recommendation (the committee's words)
A significant and considered reform of council tax will take several years to take effect. Until it does, the Government should devolve power and responsibility for setting council tax to councils. This should include the power for individual councils to revalue properties in their area, define property bands, and set the rates for those bands. Individual councils should also be given the power to apply or remove discounts and premiums (such as the single person discount), and to determine the criteria for how they are applied. Councils using these powers will have a responsibility to justify their use to their electorates, who will hold them accountable at the ballot box. The Government should retain the power to override locally set council tax rates only in exceptional cases of councils showing financial mismanagement or a lack of social responsibility to residents. (Recommendation, Paragraph 159)
From: Housing, Communities and Local Government Committee, 2nd Report - The Funding and Sustainability of Local Government Finance (HC 514), 23 July 2025
Government response
The government responded to the whole report on 21 October 2025 (deadline 23 September 2025).
Summary written by Accountability Index from the government's response. It is not the government's own words.The government accepts the case for reform of local government finance but declines several of the Committee's specific recommendations, setting out its own reforms centred on the Fair Funding Review 2.0 and a multi-year settlement for 2026-27.
- On council tax, the government "does not accept" the recommendation to devolve full responsibility for setting it to individual councils "at this time", noting that councils already set levels and have discretionary powers over discounts and premiums.
- On the New Burdens Doctrine, the government says placing it on a statutory footing "would reduce its effectiveness", but it is reviewing and updating the Doctrine.
- On ringfencing, it intends to bring grants together into "large ringfenced consolidated grants" and to roll suitable grants into the Revenue Support Grant, rather than end ringfencing.
- On outcomes-based accountability, the final Framework will be published alongside the provisional 2026-27 Settlement, and it expects to use it from April 2026.