Source · Select Committees · Public Accounts Committee
Recommendation 12
12
Accepted
Numerous ring-fenced grants create administrative burden for local authorities, prompting consolidation efforts.
Conclusion
Outside of the finance settlement, local authorities can receive hundreds of different local grants from several government departments. While there is no official count, Councillor Pete Marland suggested that there are around 300 funding streams coming from central government to support specific services or policy objectives.25 These are often small, and ring fenced for a specific purpose, but the administrative work involved for local authorities 19 Qq 97, 102 20 Q 103 21 C&AG’s Report, para 1.10 22 LGFS0001 23 LGFS0017 24 Qq 43, 56; C&AG’s Report, para 3.15 25 Q 21 12 to review and account for the spending can be considerable.26 MHCLG acknowledged that it had previously not had the ‘best grip’ on how many grants there were outside the local government settlement.27 However, it stated that it was working with HM Treasury to consolidate the individual stream of grants that local authorities both receive and report on, believing consolidation could achieve greater value for money by giving local authorities greater flexibilities to meet need.28 MHCLG told us that the need to reduce funding streams to local government to achieve value for money was well understood by the permanent secretaries of other departments.29 We asked HM Treasury to give assurance that reducing the number of funding streams was one of its top priorities. HM Treasury told us that it could “absolutely give that assurance”, and that it was using the upcoming spending review to consolidate grants across the whole of government, with MHCLG adding that between five and 10 grants had already been consolidated as part of the 2025–26 finance settlement.30
Government Response Summary
The government agrees to simplify local authority funding and reduce the number of grants by the end of 2025, citing the Fair Funding Review 2.0 consultation, plans to roll suitable grants into the Revenue Support Grant, and consolidate adult social care grants as part of the upcoming multi-year Local Government Finance Settlement.
Government Response
Accepted
HM Government
Accepted
2.1 The government agrees with the Committee’s recommendation. Target implementation date: by the end of 2025, as part of the upcoming multi-year Local Government Finance Settlement. 2.2 On 20 June 2025, the government published the Fair Funding Review 2.0 consultation which set out the approach to radically simplify local authority funding, to provide local authorities with more flexibility and certainty over a greater proportion of funding. This will be supported by the Local Government Outcomes Framework, which, as set out above, establishes 15 national outcomes that central government wants to work with local authorities to deliver with their more flexible funding. From April 2026, the Framework will be used to help facilitate better join-up across central government to support local delivery, based around a set of collective priorities for local government. To simplify local authority funding that is currently distributed outside of the Local Government Finance Settlement, the government intends to bring together grants from across departments into large ringfenced consolidated grants, delivered as part of the upcoming multi-year Settlement. At least four large, consolidated grants will bring together funding streams across government for Public Health; Children, Families and Youth; Crisis and Resilience; and Homelessness and Rough Sleeping. The government also intends to roll suitable grants into the Revenue Support Grant where appropriate. 2.3 The government also proposes to simplify existing Settlement grant funding, including for adult social care. The government is proposing to consolidate the Market Sustainability and Improvement Fund and Social Care Grant into the updated Settlement Funding Assessment next year. The LA Better Care Grant will remain a grant, to ensure continued joint working between health and social care. MHCLG and DHSC continue to work closely on funding arrangements and assurance for adult social care. 2.4 The upcoming multi-year Settlement will pave the way for further consolidation in future years. Cross-government work will continue to explore which grants can be consolidated into the Settlement, aiming to avoid the use of micro-grants and future proliferation of grants to local authorities.