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.”

The Government today announced a shake-up in the funding model for councils. The main formula for local government grant funding will have a stronger link to population and levels of deprivation. This will redistribute funding away from small towns and rural areas towards bigger cities. District council services – including housing, homelessness, leisure centres, environmental services and planning – are set to lose out.

Preventative services, which can save vast sums across other public services, are likely to be hit hard because councils are not statutorily required to provide them. Many councils are likely to find they have little option but to cut back on services that prevent homelessness and keep people physically and mentally healthy so they don’t need acute NHS services or formal social care.

Meanwhile, the Government announced it is removing a major incentive for councils to build new housing. The New Homes Bonus is being removed despite the Government’s aim of building 1.5 million new homes during this Parliament.

The Government has also confirmed it will fully reset the baseline for retained business rates. This will penalise areas which have seen an upsurge in business rates receipts in recent years due to their pro-growth attitude which has boosted their local economy. This will hit many district councils particularly hard, taking up to 20% out of their spending power before transitional funding protection.

The Government maintains that local government as a whole will receive a real-terms increase in spending power for each of the next three years. The consultation does not provide details of funding allocations for individual councils. But DCN believes that many district councils will not get a real-terms increase. This is due to a combination of the funding formula changes, business rates reset and the fact that districts do not raise the extra social care precept for council tax.

Technical changes to the funding formula for flood defences and coastal protection appear likely to create additional pressure for many district and unitary councils already struggling to absorb the impact of more extreme weather and environmental change.

In response, Cllr Jeremy Newmark, DCN Finance spokesperson, said:

“The funding reforms unfairly penalise the users of district council services, which offer a lifeline to many people and enrich the lives of many more. Services including housing, parks, leisure and wellbeing, street cleaning and town centre regeneration will inevitably be impacted by the triple whammy of scrapping the New Homes Bonus, resetting business rates and the new funding formula.

“These changes redistribute money away from the vital preventative services that districts provide. These include leisure centres, which keep people healthy and out of hospital; home adaptations for older people and people with disabilities, which reduce demand for social care; and early intervention to support people at risk of homelessness.

“The old system was unfair and did not work properly for most councils.  The principle of targeting deprivation is welcome. However, these proposals will have problematic knock-on effects.

“In the Spending Review, the Government rightly emphasised the importance of long-term investment. So it’s disappointing that this principle has not been applied to local government funding. District council services have been proven to reduce costs for the NHS, adult social care and the wider public purse.”

On scrapping the New Homes Bonus, Cllr Newmark added:

“District councils have seen the biggest increase in housing targets in the country, with 82% of additional homes earmarked for our areas. We want to build more homes and play our part in the national growth mission. Scrapping the New Homes Bonus will make our job harder.

“The challenge of building our share of 1.5 million homes this parliament was big enough already. We need our work to be properly funded if we are to deliver thriving communities which offer jobs, opportunity and all the public services new residents rightly expect.”

On local government reorganisation, Cllr Newmark added:

“It is disappointing that the Government continues to assert that local government reorganisation (LGR) will deliver substantial savings. The evidence from previous rounds of reorganisation is far from conclusive that real savings will be delivered. What isn’t in doubt is that reorganisation brings with it significant short-term costs and service disruption.

“New unitary councils have requested exceptional financial support of £146m from the Government over the past two years. LGR is not a panacea for the serious financial challenges facing local government and threatens to worsen the situation in the short term.

“LGR can bring long-term economic benefits if done in the right way. We strongly believe this means creating smaller unitary councils with a close connection to local places and communities. This is the best way to drive local growth and prevention.”

Notes to editors

On prevention statistics

• DCN research ‘Fit for the Future: The Health Value of Wellbeing and Leisure Services, shows that investment in physical activity and leisure centres focused on just 1 million of the inactive population would save up to £314 million for the cost of treatment of 45,000 diseases that would be avoided over a 10-year period.

• A district council service expediting discharges in just two Norfolk hospitals is estimated to have saved 12,790 bed days, at a value of more than £8.5 million last year.

• In a recent DCN survey, over half of councils responding said that leisure services were at risk of cuts.

On housing targets

• Under the new method for calculating housing need, 38% of the new 371,000 annual national housing target would be delivered in district areas.

• Of the 66k per year additional homes in the 371,000 target, 82% are in district areas.

All district councils need a guaranteed real-terms increase in underlying funding and councils with high temporary accommodation costs need additional targeted support. The statement today fell short on both counts.

Overall the Statement provides less financial support for district councils than last year at a time when cost pressures continue to increase. The extra funding from the Extended Producer Responsibility for Packaging scheme is welcome and we expect some districts to benefit from the new Recovery Grant.

But, until we see the detail of the Finance Settlement and the shake-up of various grants, DCN is concerned that some districts with tight financial pressures will lose out.

In particular, the Statement offered no additional new money to support councils on the front line of the growing temporary accommodation crisis despite a rapidly worsening homelessness problem.

The statement also indicated a shake-up in some of the funding streams upon which many district councils depend:

• Funding from the Rural Services Delivery Grant will be “repurposed”;
• The New Homes Bonus will be reformed beyond 2025-26;
• Various growth grants will be “consolidated” into core grant funding.

Cllr Jeremy Newmark, Finance Spokesperson for the District Councils’ Network, said:

“District councils, like other types of council, continue to feel the pinch financially. Today’s finance statement contains welcome news of an increase to core spending power but inevitably falls short of guaranteeing the financial stability which will secure the long-term future of essential local services.

“District councils will be anxious to see the detail about the new Recovery Grant and Extended Producer Responsibility payments. Until they do, many will remain concerned about missing out on a real-terms funding increase next year, at a time they face higher costs and rising wages. The danger is that councils have no choice but to cut back on services which support jobs, housing, growth and wellbeing as a result.

“Many district councils face spiralling costs for providing emergency temporary accommodation. The homelessness prevention funding announced in the Budget was welcome. But they will be concerned that the Government has provided no additional support today to tackle the immediate financial pressure from temporary accommodation. This poses a real threat to financial sustainability and should be treated with the same urgency as social care.

“Rural districts will be nervous about the loss of the Rural Services Delivery Grant and will seek urgent assurances that the Government has clear plans to ensure rural poverty is not exacerbated.

“District councils are essential partners in ensuring homes are built, local economies grow and ill-health and homelessness are prevented – but the work on which so many communities depends needs to be properly funded if it is to continue.”

There will be a maximum council tax rise of 2.99% or £5 and councils will receive a 3% minimum funding increase before council tax increases are taken into account. We welcome the decision to maintain the New Homes Bonus for another year.

Cllr Elizabeth Dennis, finance spokesperson of the District Councils’ Network, said:

“The tight funding settlement announced today means most district councils will feel they face no alternative other than to put up council tax bills in order to safeguard the services upon which their communities depend.

“Even if councils go for the maximum council tax rises allowed, the small growth in our income comes nowhere near to keeping up with the inflationary and demand pressures that have accumulated over the past two years and will continue into the next year.

“The last thing we want to do is to scale back the preventative and value-adding services on which our communities depend and which save money for the NHS, wider public sector and the taxpayer –such as leisure and wellbeing, housing, homelessness prevention, and community outreach. But the likelihood is that many councils will have to do this.

“Councils need more freedom to set council tax, fees and charges locally at a level which meets the needs of their local communities. We call on the Government to look again and act to help us preserve these vital local services for the benefit of the whole of local government and the taxpayer.

“This is not a sustainable way of running local government finance. We need to devise a new system which gives councils long-term security to invest in and develop their services, and can help refocus public expenditure towards early intervention and prevention.”

Cherished local services – including many which support vulnerable people or take pressure off the NHS – are set to disappear or be cut as a result of district councils’ growing financial crisis.

Culture, community support, parks and green spaces and leisure are the services at greatest risk of being scaled back as councils face no option other than reduce their costs, a District Councils’ Network (DCN) survey reveals.

District councils are the tier of principal local government closest to communities and exist in nearly half of England. They are responsible for many of the most visible local services, such as housing, town centre regeneration, parks and waste collection.

However, the sector has seen Government grant and its spending power lag far behind inflation while it also faces higher costs resulting from intensifying demand for services. Member councils are, in particular, reeling from higher costs on homelessness and temporary accommodation and the cost of helping many people facing losing their homes from tipping into crisis.

DCN’s research predicts a total funding shortfall of £550m (15% of net spend) for district councils in 2023-24 and £610m (16%) in 2024-25.

We also anticipate that councils will make savings amounting to 9% of their budgets, potentially leading to workforce cuts and service reductions.

Cllr Elizabeth Dennis, DCN’s finance spokesperson, said: “District council services are the most visible to local communities and provide a vital lifeline to many of our residents. However, unless we receive a realistic financial settlement and the financial freedoms to ensure we can raise extra money to undertake our work, councils are left only with an impossible choice of which services to cut back.

“We already anticipate councils will make savings amounting to 9% of their budgets, where possible through efficiencies, but increasingly savings are only achievable through workforce cuts and service reductions.

“Any further scaling back of district council services would be disastrous. The most vulnerable people will be hit hardest – for instance those who benefit from our advice services and financial help to prevent them from becoming homeless. It would also hit the NHS which benefits from our work to keep people out of hospital and in good health through rehabilitation services at leisure centres and home adaptations for people who are at risk of suffering falls.

“Far from levelling up taking place, without additional support it is likely our places will look poorer, our people will have fewer opportunities, our environments will be less pleasant and the overall public realm will be in decline, unless we receive urgent help from the Government.

“We know public finances are tight but it is essential that our spending power rises by at least 6% next year to avoid the worst cuts. We also urge extra support for the services hit by the highest rising demand, such as providing temporary accommodation where current funding lags far, far behind our actual costs.”

DCN is calling for:

• An increase in district council spending power of at least 6%, through additional grant and freedom to raise money locally so we can support ourselves independent of the Treasury.
• In particular, districts should be able to increase their element of council tax by 4.99% or by £10 – whichever is greater – without a referendum. This would cost Band D council tax payers a mere 20p a week.
• Additional support for homelessness and leisure services, which have both seen significant cost rises.
• The implementation of the Government pledge to allow councils to increase planning fees to lessen the shortfall between them and the overall cost of providing planning services.

We expressed concerns that proposals would not move licensing services onto a fair financial footing, and called for more powers for councils to assess areas where there may be a cumulative impact from multiple premises located in one area.

“The planning and licensing systems are the ideal place to make an assessment about where it is appropriate to introduce new premises.”

“Our view is that this is an important step towards ensuring that licensing authorities are properly funded for the costs incurred in regulating these premises and tackling any social harm. Any increase must be implemented no later than November 2023.”

You can read the full response here.

We said: “we have significant concerns that these metrics could be used as a way of ranking councils according to the level of debt they currently hold or the types of investments they have historically made. These indicators, whilst potentially useful to identify certain outlier councils, do not tell the full story and may not always accurately indicate whether any given council is in a detrimental position. In the DCN’s view, a council investment portfolio could be very well supported and diversified yet still fall foul of these metrics. It is vital that these metrics are used carefully and in conjunction with other information.”

We highlighted that the clear majority of district councils have borrowed and invested responsibly to support their ongoing spending and that the growing curtailment of the investment freedoms first introduced in 2010 now denies them the ability to generate income from making prudent commercial investments – in some case quite significantly.

You can read our full response by clicking here.

“DCN believes this is an opportunity to remove centrally prescribed mandatory provisions and instead empower councils to decide whether or not to support certain ratepayers. However, this would be possible only with a transfer of resources equivalent to the existing value of those exemptions and reliefs to local government. Such an approach would support our view that, as a matter of general principle, exemptions and reliefs should be set locally” we said.

You can read our full response by clicking here.

We expressed concerns that this would increase the burden on local tax payers and could open up the system to abuse.

“It would be preferable for the Government to expand existing guidance to inform local decision-making about whether an exemption is suitable. For example, if a property cannot reasonably be occupied within 12 months of coming into the taxpayers’ control, then councils should be able to exempt them from the empty home premium.”

“A national approach would also undermine the ability of councils to use premiums to encourage empty or under-used properties back into local housing markets. During a housing supply crisis, councils need stronger levers to encourage properties to be brought back into use as dwellings, not weakened existing levers.”

You can read the full response here.