The final Local Government Finance Settlement (LGFS) 2026-27 contains good news for district
councils.

There had been the prospect of the Government making a last-minute change to policy
assumptions that could have hit many district councils and imposed a substantial cut to funding
allocations compared to the provisional numbers given to councils in December.

DCN is very pleased that the Government has listened to representations from DCN and many
of our member councils. It is introducing a new Adjustment Support Grant to ensure that no
council sees a reduction in its Core Spending Power in 2026-27 compared to the indicative
allocations that were published in December.

This means that councils can now implement the budget plans for 2026-27 that they have
consulted on locally without having to make disruptive changes late in the day. This is good
news for the people and places our members represent.

There is currently no commitment to extend the Adjustment Support Grant beyond 2026-27 but
DCN understands discussions are continuing to achieve that. DCN will work closely with
MHCLG to ensure there is suitable and similar protection for the following two years.

More widely, the final settlement has mixed results for DCN members. Some DCN councils gain
from funding reform, especially in more deprived areas. This will clearly be welcome for the
beneficiaries.

However, on average, district councils face a real-terms cut in their funding at a time of rising
demand and on top of a long period of funding restraint. We expect this will particularly affect
councils in more remote and rural areas. Many councils will also need to absorb the impact of
the abolition of the New Homes Bonus and the business rates baseline reset. Overall, the
financial outlook will remain challenging for many DCN member councils.

DCN welcomes the continuation of the Internal Drainage Boad Levy support grant. However,
funding support for councils and local taxpayers unavoidably affected by IDB levies remains
much lower than what they need. We will continue to push hard for MHCLG and Defra to identify
and implement a long-term funding solution as soon as possible.

In response, Cllr Jeremy Newmark, Finance Spokesperson for the District Councils’
Network (DCN), said:

“DCN has always supported aligning local government funding more closely with the cost of
providing vital frontline services. We support the principle of targeting funding more directly at
deprivation.

“There had been speculation that the final settlement would incorporate unanticipated impacts
substantially reducing final allocations for many district councils at a very late stage in the
process. We are pleased and deeply appreciative that the Government has listened to DCN’s
strong representations and worked with us to ensure that no council is facing a last-minute
reduction to its expected level of core spending power next year. It is understood that
discussions are continuing with a view to maintaining the Adjustment Support Grant beyond
2026-27. DCN will work closely with MHCLG to ensure there is suitable and similar protection for
the following two years.

“Inevitably, the funding redistribution reflected in the final settlement has created winners and
losers. Some district councils will benefit from meaningful funding boosts. Others will be forced
to rely on transitional arrangements to help them balance their budgets. It is clear that district
and unitary councils, especially in more remote and rural areas, will struggle to preserve the full
range of services that residents need and value.”

“The transitional funding protection is welcome. But, for many districts, the settlement still
amounts to a real-terms reduction in core spending power. That is why we will be asking
Government to act beyond the finance settlement to help councils support themselves and
continue delivering high-quality services. We will be urging them to swiftly progress the review of
fees and charges. Councils need to be able to recover the full cost of services they provide.”