Source · Select Committees · Public Accounts Committee
Recommendation 28
28
Accepted
MHCLG aims to align local funding with needs but acknowledges reform distribution risks.
Conclusion
We asked MHCLG how its reforms will help councils deal with the immense financial challenges they face. It told us it recognised the problems and, through funding reform, it was seeking to align the way funding is distributed much more closely with changes in demographics, levels of 69 Committee of Public Accounts, Support for children and young people with special educational needs, First Report of session 2024–25, HC 353, 15 January 2025 70 HM Treasury, Government Response to the Committee of Public Accounts on the First to the Fourth and the Sixth to the Ninth reports from Session 2024–25, April 2025 71 Q 14 72 Q 78 73 Q 78 74 Qq 78, 80 75 C&AG’s Report, para 3.41 76 C&AG’s Report, para 3.46 77 MHCLG, Local government reorganisation: letter to two-tier areas, 16 December 2024 19 deprivation, and the need for services.78 It recognised that the funding formulae had not been updated for many years and, as a result, was “out of kilter” with the actual needs of people.79 MHCLG acknowledged the risk highlighted by Professor Tony Travers that because reform has not been tackled for so long, it will lead to huge losses for some and massive gains for others across the local government system.80 A second consultation, likely in June, would set out more detail and give local authorities an indication of their future funding and the transitional arrangements.81
Government Response Summary
The government agrees, outlining its Fair Funding Review 2.0 consultation to simplify local authority funding, consolidate grants, and confirm new funding for children's social care, adult social care, SEND, and homelessness, with further details expected by the end of 2025.
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, establishing 15 national outcomes... To simplify local authority funding... the government intends to bring together grants from across departments into large ringfenced consolidated grants... 2.3 The government also proposes to simplify existing Settlement grant funding, including for adult social care... 2.4 The upcoming multi-year Settlement will pave the way for further consolidation in future years. 6.1 The government agrees with the Committee’s recommendation. Target implementation date: end of 2025. 6.2 The government issued invitations to councils... to submit proposals for unitary local government on 5 February 2025... 6.3 On 20 June 2025 the government published the Fair Funding Review 2.0 consultation, which invites views on proposals to reform local government funding... including proposed transitional arrangements. The government is committed to providing the sector as much certainty as possible... followed by a multi-year provisional Local Government Finance Settlement later this year. 6.4 The government agrees with the Committee’s recommendation. Target implementation date: end of 2025. 6.5 The government will provide further details on funding to support local authorities with key service pressures at the provisional Local Government Finance Settlement later in 2025. 6.6 The government is committed to reforming children’s social care... 2025 Spending Review confirmed over £2 billion over the next three years... 6.7 For adult social care, the Spending Review allows for an increase of over £4 billion in 2028-29... 6.9 Baroness Casey of Blackstock is leading an independent commission into adult social care... Phase 1 will report in 2026... 6.10 The Department for Education Spending Review settlement confirmed funding for reform of the Special Education Needs and Disabilities (SEND) system... 6.11 The government invested £1 billion in homelessness and rough sleeping services in 2025-26... A long-term homelessness and rough sleeping strategy will be published later in 2025.