Government Set to Focus Money on Metropolitan Cities and Towns at the Expense of Counties
The government has published its Local Government Finance Policy Statement for 2025/26, with this year’s report setting out the government’s new and updated proposals for redistributing council funding across England.
The statement confirms that a significant amount has changed since the government first unveiled its proposals in the Fair Funding Review this summer. The review was already challenging for the vast majority of the County Councils Network’s (CCN) members, with 33 out of 38 councils set to have to raise council tax in order to receive a real-terms increase in spending power.
A prominent change is that of the return of the Recovery Grant, which was supposed to be a ‘one off’ fund last year and targeted heavily towards metropolitan borough councils and some inner London authorities. In total, 3% of this grant will go to CCN councils.
Other measures benefit urban councils at the expense of rural ones, including reducing ‘remoteness’ within the formulae. Remoteness accounts for the additional costs of delivering services in large rural and remote areas but it will now only be applied to social care, and no other services.
Cllr Steven Broadbent, Finance Spokesperson for the County Councils Network said: “While the original Fair Funding 2.0 proposals were better than many of our councils feared, today’s announcement confirms the government intends to backtrack on its funding commitments to rural areas and unfairly target resources to towards urban metropolitan cities and towns.
“Last year, the government made available a £600m ‘Recovery Grant’ to urban areas, as a one-off fund ahead of doing a new ‘needs assessment’ to judge how much areas should receive in this Fair Funding Review. The updated needs assessment, which included a measure of deprivation, showed that CCN member councils have seen the biggest increase in needs.
“But ministers have decided to overlook this and continue this ‘one off’ Recovery Grant for the duration of this Parliament – once again cherry picking which councils to focus funding on and redistributing even more funding to urban areas at the expense of counties. This seriously undermines the principles of the review, with this arbitrary measure not consulted on. This raises questions whether this review has been evidence-led and transparent.
“Compounding this, our councils face a further blow which will pile further pressure on rural services. Previous ministers had accepted the ‘compelling’ economic case for fully recognising the additional costs faced by rural authorities, including a remoteness adjustment for all council services in their original proposals. But despite the wide-ranging evidence submitted by our councils, the government has backtracked under pressure from urban councils, significantly downgrading this element of the proposed reforms, which will further tip the scales towards metropolitan and London councils.
“The Fair Funding Review was already extremely challenging for many county areas, with some councils set to lose out substantially. Our analysis has shown that county and rural taxpayers are already set to foot the bill for the reforms, with 33 of our councils facing a real-terms reduction in funding unless they increase their council tax by 5% per annum over the next three years. Today’s changes will mean the pressures facing county and rural councils and taxpayers have only intensified.
“CCN will analyse these proposals as we await the provisional settlement and consultation later this year and continue to make the case for a fair and sustainable funding settlement that does not put vital frontline services and the financial viability of our councils at risk.”
