Solutions to financial instability offered by local government organisations in joint letter to chancellor

Local government organisations have joined forces to set out the short- and medium-term measures they say will ensure financial stability in a letter to the chancellor ahead of the Autumn Budget and Local Government Finance Settlement.

For 2025/26, the organisations – which include the Local Government Association, County Councils Network, District Councils Network and Special Interest Group of Municipal Authorities – are calling for a “significant and sustained increase” in overall funding that reflects “current and future costs and demands for services”.

The government should also “provide certainty” on the future of the statutory override for Dedicated Schools Grant deficits, and uprate temporary accommodation subsidy rates to 90% of 2024 Local Housing Allowance rates, the organisations said.

A “planned succession” to the Household Support Fund is also necessary, and should be worked on in partnership with local government, the letter stated.

In the medium term, the organisations have called for the introduction of multi-year settlements and measures to simplify the number of funding pots and end competitive bidding for grant funding.

The letter also asks for certainty on finance reforms including the business rates reset, the Fair Funding Review, and reforms to other grants such as the New Homes Bonus, including a commitment to transitional funding.

Other measures include reform of the SEND system, strengthening Housing Revenue Accounts, and “additional freedoms and flexibilities” relating to council tax, business rates and sales, fees and charges.

The letter is signed by Louise Gittins, chair of the Local Government Association; Tim Oliver, Chairman of the County Councils Network; Sam Chapman-Allen, chairman of the District Councils Network; Claire Holland, chair of London Councils, Sir Stephen Houghton, chair of the Special Interest Group of Municipal Authorities; James Lewis, chair of Core Cities; and John Merry, chair of Key Cities.

“Looking ahead, we want to work with the government on reforming the local government funding system and forming a long-term plan for greater financial sustainability for councils that also strengthens the link between resources and need,” the letter concluded.

“Stabilising the local government sector financially will not only protect key services, it will also provide a return on investment to the tax-payer, while improving outcomes for the people and places councils serve.”