Housing secretary announces £500m in funding for councils

Government said that the Treasury will be providing £500m, with further details to be set out at the upcoming Budget, and that details on the distribution of this funding will be included in the final Local Government Finance Settlement early next month.

The government said there is an extra £100m for councils, comprising an increase to the Funding Guarantee from three to four per cent and £15m for the Rural Services Delivery, which is its largest cash increase since 2018-19.

The £100m also includes £3m for authorities facing high levies from Internal Drainage Boards, which help to protect residents from flooding, and additional funding for the Isle of Wight and the Isles of Scilly, with the remainder distributed through the Services Grant.

The government said its new funding package should be used to “address the pressures facing councils and improve performance” and “should not be put aside for later use or spent on areas that are not a priority”.

Separately, government said that councils will be asked to produce “productivity plans”, which will set out how they will improve service performance and reduce wasteful spend, including on consultants and HR spending on equality, diversity and inclusion.

DLUHC will also set up an expert panel to advise the government on financial sustainability in the sector, which will contain both internal and external experts. Work will also continue between DLUHC, the Department for Education and the Department of Health and Social Care to ensure “value for money and sustainability of the sector”, government added.

Government said it is “committed to improving the local government finance system beyond this settlement” in the next parliament and the minister for local government will be engaging with the sector on this over the coming months.

This funding builds on the £64bn funding package announced in December as part of the provisional Local Government Finance Settlement for 2024-25.

Mr Gove said: “We have listened to councils across England about the pressures they’re facing and have always stood ready to help those in need. 

“This additional £600m support package illustrates our commitment to local government. We are in their corner, and we support the incredible and often unsung work they do day-to-day to support people across the country.”

Simon Hoare, minister for local government, said: “This injection of funding will help ensure services which people rely on can continue – and demonstrates how important we view local government. We have listened to various organisations and considered their views seriously and I’m grateful to those who reached out to me.

“The funding offers something for all of our hard-working councils, with additional funding for social care as well as help for rural authorities to deliver essential services.”

Council groups have for months been highlighting to government the financial challenges they face, including escalating temporary accommodation costs.

When the Autumn Statement was unveiled, the LGA criticised the lack of additional funding to support “chronically underfunded” public services.

At the time, Shaun Davies, chair of the LGA, said: “Adult social care remains in a precarious position, record numbers of households are in temporary accommodation and there are now more than 80,000 looked-after children in England.”

And in November, councils urged the government to take “urgent” action as the temporary accommodation crisis worsens and threatens their financial viability.

The response from councils

Local authority bodies have welcomed the new funding but called for long-term solutions.

Mr Davies said: “The LGA welcomes that the government has acted on the concerns we have raised and recognised the severe financial pressures facing councils, particularly in providing services to the most vulnerable children and adults through social care services and delivering core frontline services to communities.

“We will continue to work with government to achieve a sustainable long-term funding settlement and updated distribution mechanisms, as well as legislative reform where needed, so that local government can play its full part in delivering inclusive prosperity and growth through investment to support people, places and the planet.”

Tim Oliver, chair of the County Councils Network, said: “We strongly welcome the government listening to our concerns, and today’s announcement of an additional £0.5bn will go some way to easing the pressures and in particular addressing the escalating demand and costs of delivering social care and home-to-school transport.

“Whilst this extra funding will undoubtedly help us protect valued frontline services, councils, of course, still face difficult decisions when setting their budgets for 2024-25.

“Looking further ahead, reform of local government finance and the way in which we are expected to provide services is imperative.

“Councils require a long-term financial settlement to enable us to plan for, and meet, the demand from our growing elderly populations and the more complex needs of residents requiring social care. This must be coupled with a comprehensive reform programme to bring in line the funding envelope available to enable us to deliver effectively our statutory responsibilities.”

Sam Chapman-Allen, chair of the District Councils’ Network, said: “The District Councils’ Network welcomes the government’s decision to allocate additional funding for essential district services, a move that will benefit residents and businesses throughout England. This offers some relief to district councils and the communities we support. It will help mitigate potentially extensive reductions to valued local services.

“But it’s important to note that the financial and operating challenges for district councils remain significant. It is clear that more comprehensive solutions will still be needed to fully address the ongoing financial pressures, including homelessness.”