LGIU Response: Provisional local government finance settlement 2026/27

Jonathan Carr-West, Chief Executive, LGIU, said:

“The government’s provisional local government finance settlement for 2026/27 unveiled today has rightly been lauded for marking the first multi-year settlement in a decade, for taking the first steps to ensure that distribution more closely matches need, and for rationalising funding streams. These are reforms that will make a difference to many councils across the country.

They also lay bare the scale of the challenge the sector faces today, because even with this change, and a significant uplift in spending power, there is still much further to go to stabilise council finances and protect essential services now and for the future.

The aim of the fair funding review has always been the same: ensure that the distribution of money more closely matches need. This part of the reforms is reaching its end, and now we need greater focus on the most pressing issue facing local governments today: getting more money into the system.

The government’s work towards reforming Special Educational Needs and Disabilities (SEND) pressures is welcome, alongside their evident emphasis on tackling homelessness and temporary accommodation costs, and promise of care service reform. These measures recognise that the current system is unsustainable and that councils cannot continue to absorb these costs alone.

But they do not go far enough to address the systemic challenges that are faced today. Many of these reforms will not come into effect until as late as 2028. Meanwhile, councils will be pulling out all the stops to meet ever-surging citizen demand. The true test of whether the new system is working today will be whether the number of councils using exceptional financial support begins to shrink.

A notable signal of change in this settlement is the relaxation of council tax referendum rules across six areas. This is where the government must go further. Instead of continued tinkering at the edges of councils’ fiscal powers, we need wholesale reform of local government finance across the country – capable of addressing immediate pressures as well as long-term sustainability.

Further fiscal devolution, a systematic approach to understanding what exactly councils are required to do and how they can raise the resources to do it, and truly embedding councils in national decision-making – that will be how we bring our local governments in line with our international peers. This is another positive early step, and we urge the government to take this opportunity to go further.”