2026 State of Local Government Finance in England

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Each year, the LGIU surveys council leaders, chief executives, cabinet members for finance, and senior finance officers to find out how local authorities are managing and responding to an increasingly challenging fiscal environment.

This report, the LGIU’s 13th annual State of Local Government Finance in England survey, indicates that 15% of the sector are likely to need Exceptional Financial Support (EFS) this financial year, with 39% expecting to do so within the next five years. This scheme is widely seen as an unsustainable mechanism that is likely to load councils with additional debt and worsen the financial challenges facing the sector. One Director of Finance said:

“It’s like a payday loan, the interest rates are high and it seems like those councils who did borrow are now unable to get out of the cycle of borrowing to stay afloat”

A chief executive of a London Borough said:

“There is no escape once you start.”

The surging pressures of temporary accommodation and SEND continue to spiral, while councils anticipate the long-term burden of adult social care on the horizon. A director of finance from a district council said:

“Our demand for housing is at record levels and we are not seeing any decrease.”

While a cabinet member for finance from a unitary authority commented:

“SEND … has the potential to sink the local government community in one hit … reform needs to be radical.”

To balance budgets, council tax rises and increased charges are planned in nearly all councils (>90%), while most will cut spending (57%) and draw down reserves (56%).

In terms of government reforms, some attract strong support among those who benefit, particularly multi-year financial settlements and the UK government’s takeover of SEND deficits.  However, wider reforms receive limited backing – particularly Fair Funding (36%), tourist tax (24%), local government reorganisation (13%), and mansion tax (7%).

There remains strong support for greater fiscal devolution, expanded financial freedoms for local government, and radical reform of council tax. These solutions present themselves as genuine remedies to the financial challenges faced by local authorities.

We therefore believe that the Government must commit to a full analysis and rationalisation of council duties, and use estimates of costs to inform the overall level of funding necessary for local government. The government should also review local taxation, and legislate for a statutory standing commission where local and central government can communicate on relevant policy issues, and through which local government is consulted on changes to relevant policy areas.