Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 48
48
Accepted in Part
Devolve comprehensive tax-setting powers to local authorities, including for new local taxes.
Recommendation
The Government must be more courageous with its long-term plans for the funding of local government. While stabilisation is important in the short term, both the Ministry and HM Treasury need to start considering how to get the sector back to full strength, which will need to include serious consideration of long-term, radical reforms, and further devolution of fiscal powers and autonomy. As well as reforming local taxes that are currently in place, HM Treasury must devolve tax-setting powers to local authorities, allowing them to set their own forms of local taxes such as tourist levies. (Recommendation, Paragraph 182) Councils in financial distress
Government Response Summary
The government has committed new grant funding and plans fundamental funding reforms from 2026-27, while also advancing measures through a Bill to empower Mayors with fiscal powers, including the ability to charge a Mayoral Community Infrastructure Levy (CIL) and add a council tax precept.
Government Response
Accepted in Part
HM Government
Accepted in Part
This Spending Review provides over £5 billion of new grant funding over the next three years for local services that communities rely on. This includes £3.4 billion of new funding through the Settlement which, when taken together with a 3% core council tax referendum principle and a 2% adult social care precept, results in a 2.6% real terms average annual increase in Core Spending Power over the Spending Review period. From 2026–27, we will also fundamentally improve the way we fund local authorities, and direct funding to where it is most needed, through delivering funding reforms that address the unfairness in the current system, through the first multi-year Settlement in 10 years. The government has also committed to simplifying the wider local funding landscape, reducing the number of grants and consolidating them into the multi-year Settlement so local authorities can plan more effectively. The Government is also committed to strengthening the sector and to empowering Mayors to support growth. The Government is providing Mayoral Strategic Authorities which meet the specified eligibility criteria set out in the English Devolution White Paper with Integrated Settlements. Integrated Settlements give mayors meaningful control over a flexible, single funding pot, empowering them to invest in local priorities and make the strategic policy decisions necessary to foster growth, and improving the fragmented funding landscape for Mayoral Strategic Authorities. In the English Devolution White Paper, the Government also set out its proposal for Mayors of Strategic Authorities to be able to charge developers a Mayoral Community Infrastructure Levy (CIL) once they have a Spatial Development Strategy in place. This is being taken forward through the English Devolution and Community Empowerment Bill. The Mayoral CIL is a charge which can be imposed by the Mayor on new development in their area. It is an important tool that places can use to help them deliver the strategic infrastructure needed to support development in their area. The Bill also includes measures that ensure all Mayors have the option to add a precept to council tax in their area on all areas of spend. This revenue can be used to fund mayoral priorities. The Government recognises continued interest in further fiscal devolution and regularly engages with strategic authorities on the matter.