New grant funding for councils

Increases in funding will not meet all cost pressures.

Faced with significant economic challenges to address, the Chancellor’s Spending Review provided a mixture of positive news and disappointments for local government.

The LGA was pleased to see the inclusion of new grant funding for councils over the next three years to support vital services. 

This will help meet some – but not all – of the extra cost and demand pressures they face just to provide services at pre-pandemic levels.  

The funding packages of capital investment in skills, transport, house building and the provision of school places for children with special educational needs and disabilities (SEND) were also positively received, and will support councils in their work to address existing issues exacerbated by the pandemic and raise living standards for residents. 

However, despite councils playing a critical and trusted role over the past 18 months, we were disappointed to see that the Spending Review did not commit to a much-needed multi-year funding settlement for local authorities, nor give any indication on the future of business rates retention and the Fair Funding Review. 

Increases in core spending power projected by the Government will require a council tax rise of 3 per cent per year (a general increase of 2 per cent plus a 1 per cent adult social care precept). This will meet estimated cost pressures to provide services at pre-pandemic levels in 2022/23 but leaves a shortfall of at least £1 billion in 2024/25. 

Insufficient funding has been made available to meet the existing funding pressures faced by councils, especially in relation to adults’ and children’s social care.

This leaves councils facing immediate challenges and continued uncertainty of how services will be funded in the medium term. 

Without this security, councils’ ability to plan and create budgets and invest resources that reflect local need is limited, maintaining pressures on the rest of the public sector and putting vulnerable people at risk of being left behind. 

Though funding will be allocated to social care from the Health and Care Levy, which will ensure personal care costs are capped and provide some further investment for purposes to be outlined in a forthcoming white paper, the Government’s reliance on increases in council tax to meet cost pressures is not a sustainable way to fund adult social care in the long term. 

The LGA remains concerned that the funding from the levy will be insufficient to fund reforms that have been announced. 

We also warned that council tax increases will place additional financial burdens on already struggling households. 

The LGA has long maintained the view that investing in local places is one of the key tools government can use to level up communities and build back better from the pandemic. There is a risk that increased government spending will not reach the local authorities and their communities that need it most.

Moving forward, we will continue to engage with the Department for Levelling Up, Housing and Communities to lobby on behalf of councils and anticipate the approach to grant funding through the provisional local government finance settlement, which is due before the end of 2021. 

Funding for local government

The Government is providing councils with £4.8 billion of new grant funding over the 2021 Spending Review period for social care and other services, including a £200 million commitment to increase Supporting Families funding, funding for cyber security, and funding to improve local delivery and transparency. 

This is positive news. However, we remain unclear whether the Government intends to use any of this pot of funding to equalise for the differential impact of the council tax adult social care precept, as it has done in previous years

Adult social care

In September, the Government announced £5.4 billion of additional funding to reform adult social care, to be funded by the new Health and Social Care Levy. 

The Spending Review confirmed that, in England, £3.6 billion of this will go directly to local government to fund the introduction a cap of £86,000 for personal care costs and for expanding the means tested support to people with less than £100,000 in relevant assets, with £1.7 billion over three years to improve the wider social care system, including the quality and integration of care. At least £500 million of this will fund investment in the skills, qualifications and wellbeing of the care workforce, according to government.

Education and children’s social care 

We welcome the £2.6 billion for school places for children with special educational needs and disabilities (SEND), which will help councils provide places locally, rather than children having to travel to get the support they need. 

Funding of £259 million over the 2021 Spending Review period will be used to maintain capacity and expand provision in secure and open residential children’s homes. This will provide high-quality, safe homes for some of our most vulnerable children and young people. 

A new funding package of £104 million by 2024/25 will be used to take forward reforms to unregulated provision in children’s social care, improving safeguarding standards, along with £7 million in 2024/25 to implement the Department for Education’s adoption strategy ‘Achieving excellence everywhere’, to improve access to services and support for adopted children and their families. 

Council tax

The referendum threshold for increases in council tax is expected to remain at 2 per cent a year. In addition, local authorities with social care responsibilities are expected to be able to increase the adult social care precept by up to 1 per cent per year. 

The Department for Levelling Up, Housing and Communities will set out full details of the council tax referendum principles and proposed approach to allocating grant funding in the provisional local government finance settlement, expected later this month.

The LGA has always maintained that the council tax referendum limit should be abolished so councils and their communities can decide how local services are paid for, with residents able to democratically hold their council to account through the ballot box.

Levelling up and investing in communities

The release of the first £1.7 billion of the Levelling Up Fund gives those councils who were successful in the bidding process an opportunity to deliver much-needed improvements for their communities. 

The forthcoming Levelling Up White Paper presents an opportunity to reset the relationship between central and local government and put councils at the heart of delivering the Government’s programme to improve opportunities in all parts of the country.

However, for levelling up to be a success, the Government needs to move away from a pattern of piecemeal and fragmented funding streams, many of which fund very similar activity. This would help maximise the strength of councils’ local leadership, which was demonstrated during the pandemic. 

Net zero

Since March 2021, the Government will have committed £30 billion of public investment for the green industrial revolution in the UK, supporting the delivery of all the priorities in its Ten Point Plan and going further in several key areas.

As leaders of place, we are pleased the strategy recognises the importance of local government in delivering net zero and we look forward to working with government through the Local Net Zero Forum to ensure all places have the powers and resources to reduce carbon emissions.


For a full breakdown of the LGA’s response to the Spending Review, see our on-the-day briefing at response


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