Consultation outcome

Provisional Local Government Finance Settlement 2026-2027 to 2028-2029 consultation summary of responses

Updated 9 February 2026

Executive summary

This Local Government Finance Settlement is our most significant step yet to make English local government more sustainable. The government has delivered on long overdue promises to fundamentally update the way we fund councils, realigning funding with deprivation and need. This document sets out how we will deliver that commitment through the Local Government Finance Settlement (‘the Settlement’), following consultation on the provisional Settlement.

In the 2010s, cuts to central government grants disproportionately impacted deprived areas which had less ability to raise revenue from council tax and business rates. The fragmented funding system became increasingly out of date, and single-year Settlements contributed to poorer public services and slower growth, particularly for deprived areas. The previous government recognised that the system was unfair, and in 2018 consulted on a “review of local authorities’ relative needs and resources”. However, they did not implement the proposals. This government is making good on long-overdue promises.

Through this Settlement, we have delivered the Fair Funding Review reforms. We have given councils multi-year financial certainty for the first time in a decade; updated significantly out-of-date data to realign funding with need and deprivation; simplified the fragmented funding system through consolidating nearly £57 billion of grant funding; reset the business rates retention system; and committed to transformational reforms and investment in social care, SEND, and homelessness and rough sleeping services. Only around a third of councils were given the funding to broadly match their assessed need before our reforms, but that will rise to nine in ten councils by the end the multi-year Settlement. Our decision to provide transition funding means a minority of councils will receive more funding than their assessed need, but our view is that this remains the right decision to protect their financial sustainability over the medium term. As a result of these changes, the most deprived places will receive 45% more funding per head than the least deprived by 2028-29.

We know that the pressures on local government are growing. The government has announced an additional £740 million in grant funding as part of the final Settlement. This takes the total new grant funding that will be delivered through the Settlement for 2026-27 to 2028-29 to over £4 billion. This government will therefore provide over £5.6 billion of new grant funding over the next three years for the local services that communities rely on.

We made a commitment to work in close partnership with local government, and we have done so. We have conducted extensive engagement and published four consultations: The local authority funding reform: objectives and principles consultation, the resetting the business rates retention system consultation, the Fair Funding Review 2.0, and the provisional Settlement 2026-27 consultation. We have carefully considered the responses to each consultation and the views of respondents have informed our approach at every stage of funding reform.

At the policy statement in November, we announced proposals to maintain Recovery Grant allocations across the multi-year Settlement. At the provisional Settlement, we also proposed an additional Recovery Grant Guarantee to provide additional support to places most impacted by the historic funding cuts. In response to these proposals, we heard many calls for further support to repair the damage done by the previous government. We are therefore announcing an additional £440 million uplift to the Recovery Grant, targeted towards upper tier councils with a less than 17% funding increase over the period. This will take the total funding allocated via the Recovery Grant and Recovery Grant Guarantee to £2.6 billion over the multi-year Settlement. This uplift further underlines the government’s commitment to support the communities that were most impacted by historic funding cuts.

We have confirmed a total uplift of £272 million for the Homelessness, Rough Sleeping and Domestic Abuse Grant, £159 million of which is for supported housing support services. This funding will help local authorities prevent homelessness and rough sleeping before it occurs, and ensure vulnerable people are given homes that meet their needs. Together with the funding for the Renters’ Rights Act homelessness new burdens, this will bring the total value of the Homelessness, Rough Sleeping and Domestic Abuse Grant to over £2.7 billion.

We have also heard the calls for a solution to SEND deficits. That is why the government is driving forward SEND reform, with full details to be set out in the upcoming Schools White Paper. In advance of this, we will resolve 90% of local authorities’ Dedicated Schools Grant (DSG) High Needs deficits accrued to the end of 2025-26, projected to be worth over £5 billion. All local authorities with a SEND deficit will be eligible to receive grant funding subject to submitting and securing the Department for Education’s approval of a local SEND reform plan. Resolving deficits accrued to the end of 2025-26 could cut the cost of financing those existing deficits by an estimated £300 million by 2027-28.

This Settlement is about keeping a promise to repair the broken foundations of local government. Overall, this government will have made available a 24.3% increase in Core Spending Power in 2028-29 compared to 2024-25. Most authorities in England will see an increase in funding across 2025-26 to 2028-29, with the vast majority of social care authorities seeing their Core Spending Power increase in real terms.

Today’s Settlement is a key milestone in getting our councils back onto a sustainable footing, part of the changes we are making to lay the ground for councils to renew their communities for the better.

• We have delivered on our promise of fairer funding, a vital pillar of fixing the foundations of local government
• We are taking action on the pressures which most threaten local government’s sustainability and lead to poorer services across the country
• We have delivered a landmark £2.4 billion to transform children’s social care, shifting the system towards early intervention and prevention
• We have delivered £2.7 billion for homelessness, rough sleeping, and domestic abuse as well as launching a cross-government strategy in December, which set out our long-term vision to prevent homelessness before it occurs, and take cross-government action to tackle the worst forms of homelessness now
• We are reforming SEND provision and fixing the deficits facing local authorities
• We are making progress at pace on our commitment to devolve power to the right level and have taken significant steps into a new era of fiscal devolution through the announcement of the new Visitor Levy power for Mayors of Strategic Authorities
• We are ending the two-tier local government system to establish new single-tier unitary councils that are empowered to deliver for communities
• We have also published a strategy to overhaul the local audit system and the English Devolution and Community Empowerment Bill that includes a range of audit measures including the establishment of the Local Audit Office in Autumn

We recognise that the challenges facing local government are real and complex. We will continue to have a framework in place for supporting those councils in the most difficult positions. This Settlement is not a quick fix, but it is a significant step in our plan to get local government back on its feet. Looking forward, we will go further, working with local authorities to transform public services and support a sustainable local government sector.

1. Introduction

1.1 The Settlement is the annual process to determine the core resources available to local government. It consists of grant, locally retained business rates and council tax.

1.2 The Ministry of Housing, Communities and Local Government published the provisional Settlement for 2026-27 on 17 December 2025. The consultation closed on 14 January 2026.

1.3 The 2026-27 Settlement will be the first multi-year Settlement in a decade, running from 2026-27 to 2028-29. This publication outlines the government response to the consultation and confirms the final proposals for the 2026-27 Settlement. The Local Government Finance Report 2026-27 and the Referendums Relating to Council Tax Increases (Principles) Report 2026-27 still require approval by the House of Commons. The debate on these statutory reports will take place on 11 February 2026. Final allocations for 2027-28 and 2028-29 will be confirmed in their respective years as per the usual process.

2. Special Educational Needs and Disabilities (SEND): Dedicated Schools Grant (DSG) Deficits

2.1.1 The government is committed to supporting local authorities with their DSG deficits as we transition to a reformed SEND system. We will introduce support for local authorities in phases. The first phase will address historic deficits accrued up to the end of 2025‑26. All local authorities with a SEND deficit will be eligible in 2026-27 to receive a High Needs Stability Grant covering 90% of their High Needs-related DSG deficit accrued up to the end of 2025-26.

2.1.2 We will confirm the detail on further support for deficits arising in 2026‑27 and 2027‑28 before the accounting override set out in Regulation 30L of The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 (“the Statutory Override”) ends from 1 April 2028. From 2028-29, SEND spending will be covered by the overall government DEL budget, meaning local authorities are not expected to fund future SEND costs from general funds, once the Statutory Override ends at the end of 2027-28.

2.2 First Phase of Support

2.2.1 We recognise that local authorities have been operating in a challenging system that has placed significant and growing pressures on resources. Many have taken difficult decisions over several years to manage their resources while maintaining support for children and young people. As set out above, we will make available a High Needs Stability Grant covering 90% of historic deficits accrued up to the end of 2025-26 to all local authorities with SEND deficits. The 90% level reflects the need to deliver consistent support across every authority.

2.2.2 This grant will be paid in Autumn 2026, subject to each local authority submitting and securing the Department for Education’s approval of a local SEND reform plan. Resolving DSG deficits is a shared priority for central and local government, working alongside schools, health partners, early years settings and post‑16 providers. Therefore, local authorities are expected to set out a clear pathway towards an inclusive system in line with the wider vision for SEND reform. The Department for Education will commission local area partnerships to develop these plans.

2.2.3 We are committed to working closely with authorities to minimise the impact of continued deficit spending. As part of this, we are sharing best practice from previous programmes—including Safety Valve and Delivering Better Value— to support local authorities to develop local plans. Additionally, we will provide each local area with advisers to help ensure that spending is effective, efficient, and focused on improving outcomes for children and young people.

2.2.4 We recognise that some local authorities will continue to have concerns about the pressures of their DSG deficits and the sufficiency of a 90% grant. We are committed to working with local authorities with these challenges, as part of supporting the development of Local SEND Reform Plans.

2.3 Statutory Override

2.3.1 The Statutory Override will remain in place until the end of 2027-28. While it remains in effect, all DSG deficits including any proportion of the historic deficit up to 2025-26 not covered by grant (“the residual deficit”) will remain in the associated statutory reserve (“the unusable reserve”) and will not affect local authorities’ wider financial positions. The Statutory Override will end on 31 March 2028. Therefore, local authorities will need to plan to be able to meet the cost of the residual deficit from their own resources in 2028-29, including setting aside appropriate reserves in the preceding years.

2.4 Future Phases of Support

2.4.1 We know that SEND reform will take time to fully embed and local authorities will need further support. For deficits that arise in 2026–27 and 2027–28, local authorities can expect that we will continue to take an appropriate and proportionate approach, though it will not be unlimited. Whilst recognising the challenges of the current system, it remains vital that every authority provides appropriate high-quality support for children and young people’s education whilst ensuring robust controls as we work together to reform the SEND system. We will support local authorities and their partners to do this through their Local SEND Reform Plans.

2.5 Further information

2.5.1 For more information, including arrangements of Safety Valve local authorities, and the calculation of High Needs Stability Grant see the explanatory note.

3. Summary of final proposals

3.1 We recognise the pressures that local authority teams are under and are immensely grateful for the many detailed responses we have received from local members and officers, as well as the wider public, to each consultation we have undertaken. We have conducted extensive additional engagement throughout this process, which has also informed our approach to the Fair Funding Review Proposals and the final Settlement.

3.2 The section below sets out the government’s final proposals for the 2026-2027 to 2028-2029 Settlement.

Policy area: Fair Funding allocations

Final proposal:

• Proceed with the distribution of the total Fair Funding Allocation as consulted on. This encompasses the approach to Baseline Funding Levels, Revenue Support Grant, the Adult Social Care Relative Needs Formula distribution, the additional funding for local services, the approach to the Local Authority Better Care Grant, and the method for calculating tariffs and top-ups.
• As part of this, the government has committed to distribute £180 million of additional funding via the 2028-29 fair funding shares, profiled as £90 million per year in 2026-27 and 2027-28, delivered as part of RSG, and distribute £900 million of additional funding via the adult social care relative needs formula, profiled as £150 million in 2026-27, £250 million in 2027-28, and £500 million in 2028-29, delivered as part of RSG. This takes the additional funding available for adult social care in 2028-2029 compared to 2025-26 to around £4.6 billion.

Policy area: Council tax

Final proposal:

Council tax referendum principles apply to the increase in the average band D council tax charge set by a local authority.

For the final Settlement we will:

• maintain a core referendum principle of 3%
• maintain a 2% adult social care precept
• set a referendum principle of 3% or £5, whichever is higher, for shire district councils
• set a referendum principle of £5 for fire and rescue authorities
• set a referendum principle of £15 for Police and Crime Commissioners
• confirm our intention not to set referendum principles for 2027-28 and 2028-29 for City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, Westminster and Windsor and Maidenhead
• continue not to set referendum principles for Mayoral Strategic Authorities or town/parish councils

In response to the provisional Settlement consultation, we have committed to:

• provide limited additional flexibility to increase council tax without holding a referendum for seven councils facing local financial difficulty and which currently charge less than the average council tax
• provide an additional £3.50 flexibility on top of the £15 precept for 6 Police and Crime Commissioners in 2026-27 and £5.00 on top of the £5 precept for one fire authority

Policy area: Social care

Final proposal:

• provide £2.4 billion over the multi-year Settlement for the Families First Partnership programme, which will be distributed via the Children and Young People’s Services (CYPS) relative needs formula and delivered as part of the £3.1 billion Children, Families and Youth Grant
• provide a flat cash floor over the multi-year Settlement within the Families First Partnership programme element of the grant, to prevent any reductions in allocations from 2025-26 levels

Policy area: Transitional protections

Final proposal:

• move local authorities to their 2028-29 fair funding shares in increments of one third over the multi-year Settlement, by:
  • moving the Baseline Funding Level (BFL) for every local authority directly to its 2028-29 fair funding shares position in 2026-27; and
  • using the Revenue Support Grant (RSG) to offset the immediate change in BFL and gradually phase in the 2028-29 fair funding shares over the multi-year Settlement
• protect local authorities that would otherwise see their income fall as a result of changes across the multi-year Settlement, with a range of income protection levels appropriate to specific groups of authorities’ circumstances

In response to the provisional Settlement consultation, we have also committed to:

• provide an additional £15 million to ensure standalone Fire and Rescue Authorities see a Core Spending Power increase of at least 3.8% in 2026-27 compared to 2025-26, and to protect this income in real-terms in 2027-28 and 2028-29
• amend the baseline for transitional arrangements to more accurately reflect income from business rates pooling. To help councils adapt to this change, the government will provide protection for the first year of this change. To achieve this, a one-off Adjustment Support Grant will be provided in 2026-27 to authorities who would otherwise see their Core Spending Power reduce in 2026-27, compared to indicative allocations set out at the provisional Settlement.

Policy area: Business rates retention

Final proposal:

• reset the Business Rates Retention System to restore the balance between aligning funding with need and rewarding business rates growth
• increase the safety net to protect 100% of local authorities’ baseline funding level in 2026-27, moving down to the current level of 92.5% for most authorities over the multi-year Settlement
• redesign the levy rate for all authorities to better recognise the need to provide a meaningful reward for business rates growth, simplify the Business Rates Retention System and continue the levy’s role in funding the safety net

Policy area: Bespoke arrangements

Final proposal:

• provide bespoke arrangements for the City of London, the Isles of Scilly, the Greater London Authority, and the West of England Combined Authority

Policy area: Recovery Grant

Final proposal:

• maintain 2025-26 Recovery Grant allocations across the multi-year Settlement for all other authorities in receipt of this grant
• provide a Recovery Grant Guarantee, ensuring that upper-tier authorities in receipt of Recovery Grant see an increase of at least 5% in 2026-27, 6% in 2027-28 and 7% 2028-29, compared to their 2025-26 income (subject to a cap of £35 million per authority).

In response to the provisional Settlement consultation, we will also:

• uplift the Recovery Grant by £440 million for upper-tier councils in receipt of the Recovery Grant that would otherwise see a less than a 17% increase in their Core Spending Power over the multi-year Settlement, with a £10 million cap for recipients that received a 14-17% increase in Core Spending Power at the provisional Settlement. This uplift will help to bring the total funding being made available through the Recovery Grant including the Recovery Grant Guarantee to £2.6 billion over the multi-year Settlement.

Policy area: Contingency funding

Final proposal:

• hold £65 million over financial years 2027-28 and 2028-29 unallocated as financial contingency.

Policy area: Consolidated Grants

Final proposal:

We will simplify 38 revenue funding streams worth almost £57 billion over the three years (2026-27 to 2028-29) of the multi-year Settlement.

This will be delivered by:

• creating four new consolidated grants from 2026-27, worth nearly £22 billion over the multi-year Settlement
• rolling 18 funding streams into the 2026-27 Revenue Support Grant, worth nearly £35 billion over the multi-year Settlement
• bringing all prior business rates underindexation compensation funding, worth £9.7 billion over three years, into the 2026-27 Revenue Support Grant
• bringing funding for Mayoral Strategic Authorities into the Mayoral Capacity Fund, which is worth £138.6 million in total across the multi-year Settlement

Policy area: Internal Drainage Boards (IDBs)

Final proposal:

• maintain in total £5 million in funding for the local authorities most impacted by Internal Drainage Board (IDB) levies in 2026-27. Following the conclusion of the research project into IDB funding and costs, we will consider alternative solutions for 2027-28.

Policy area: Mayoral Strategic Authorities

Final proposal:

• include funding lines, where both Mayoral Strategic Authorities (MSAs) and local authorities receive an allocation, in both the Settlement and the Integrated Settlement (where the MSA is in receipt of an Integrated Settlement)
• provide an additional £39.6 million for the Mayoral Capacity Fund, bringing the total funding to £138.6 million over the multi-year Settlement
• provide £98.7 million for selected MSAs to deliver supported housing support services as part of the Homelessness, Rough Sleeping and Domestic Abuse grant
• taken together, we are confirming almost £435 million total funding for strategic authorities through the multi-year Settlement, delivered through the Mayoral Capacity Fund and the Homelessness, Rough Sleeping and Domestic Abuse grant

Policy area: Exceptional Financial Support

Final proposal:

• later this month we will confirm arrangements for supporting councils in the most difficult positions, including targeted approaches to support invest to save in services

4. Responses to the consultation

4.1 The government received 232 responses to this consultation. Responses have been carefully considered alongside other representations made during the consultation period, including from Members of Parliament who met with the Secretary of State for Housing, Communities and Local Government and Minister for Local Government. The government is grateful to everyone who took time to share their views and respond to the consultation.

4.2 The table below gives a breakdown of consultation responses by the type of respondent.

Organisation type	Count	% of total responses
London borough	22	9
Metropolitan district	26	11
Unitary authority	49	21
Shire county	12	5
Shire district	53	23
Fire and rescue authority	18	8
Local authority association or special interest group	16	7
Other organisation types consisting of: combined authority, parish or town council, other local authority grouping, other representative group, and voluntary organisations	13	6
Member of Parliament or local authority councillor	15	7
Member of the public	8	3
Total	232	100%

4.3 This document provides an overview of the responses received. It would not be practical to capture every point made in responses.

4.4 There may be discrepancies between headline numbers and figures included in this summary where responses were ambiguous or contradictory.

5. Delivering the Fair Funding Review 2.0 reforms through locally retained business rates and grant funding allocations

5.1 Question 1: Do you agree or disagree with the government’s proposals for distributing the total Fair Funding Allocation across the multi-year Settlement period from 2026-27? This encompasses the approach to Baseline Funding Levels, Revenue Support Grant, the Adult Social Care Relative Needs Formula distribution, the additional funding for local services, the approach to the Local Authority Better Care Grant, and the method for calculating tariffs and top-ups.

• respondents who agreed with the proposal: 39 (17%)
• respondents who disagreed with the proposal: 139 (60%)
• respondents who neither agreed or disagreed, did not answer this question or did not have a view: 54 (23%)

5.1.1 Chapter two of the provisional Settlement consultation sought views on the government’s proposed approach to distributing the total Fair Funding Allocation for each council, comprising Revenue Support Grant, Local Authority Better Care Grant (LABCG), and Baseline Funding Levels (BFLs).

5.1.2 Overall, 40% of respondents either agreed with the proposal or did not have a view, whereas 60% of respondents disagreed with the proposal. Of the respondents who provided a view, 52 were Shire District councils, 18 were standalone Fire and Rescue Authorities, and 107 were local authorities with responsibility for adult and children’s social care services. A higher proportion of Shire Districts disagreed than local authorities with responsibility for social care services. Respondents who disagreed did so for a range of reasons, which varied depending on their position and the class of authority they were representing. In total, 217 respondents provided additional comments to this question. The percentages included in the analysis below are based on this figure.

5.1.3 Given the broad nature of this question, the additional comments within responses often highlighted a concern about the overall amount of funding for local government. Eighty-three respondents (38%) shared concerns about the overall funding envelope for local government, or for a specific local authority. Fifty-one respondents (24%) shared concerns about the inclusion of local council tax revenue in the calculation of Core Spending Power within the Settlement. Sixty-five respondents (30%) shared specific concerns about funding for rural areas.

5.1.4 Many responses cited specific budget setting pressures. Fifty-four respondents (25%) shared concerns about social care funding, including concerns about the lack of transparency of both ringfenced Local Authority Better Care Grant beyond 2026-27 and total adult social care funding. Fifty-four respondents (25%) noted concerns about funding for Simpler Recycling weekly food waste collections. Twenty-nine respondents (13%) shared concerns about funding for Special Educational Needs and Disabilities. Nine respondents (4%) shared concerns about the level of funding for homelessness and through the Crisis and Resilience Fund.

5.1.5 Ninety-four respondents (43%) were supportive of the multi-year Settlement, and 76 respondents (35%) agreed in principle with the government’s proposals to update the underlying funding system. Twenty respondents (9%) were supportive of the government’s proposals to implement the first reset of the business rates retention system. Twenty-eight respondents (13%) were supportive of proposals to consolidate funding within the Settlement.

5.1.6 A number of respondents raised specific concerns with the proposals in their written responses. Fifty-five respondents (25%) stated that the changes made ahead of the provisional Settlement meant the principles and objectives of the Fair Funding Review 2.0 were no longer being met. Fifty-eight respondents (27%) shared concerns about the transparency of how the Settlement for each local authority had been calculated, such as the methodology and data used to construct the Relative Needs Formulas or the specific details of consolidated grants. Forty-seven respondents (22%) shared concerns about the timing of the provisional Settlement and the duration of the consultation period, with respondents citing the extent of the changes the government was proposing to individual local authority funding allocations.

5.1.7 On the proposals to maintain allocations of the Recovery Grant over the multi-year Settlement, 24 respondents (11%) agreed with the continuation of the grant, whilst 49 respondents (23%) disagreed, sharing concerns that the Recovery Grant was intended as a single-year measure.

5.1.8 Sixty-one respondents (28%) shared concerns about assumptions made on council tax within the provisional Settlement, including the assumption of 100% collection rates and the inclusion of the second homes premium in taxbase projections.

5.1.9 Twenty-eight respondents (13%) raised concerns about the population projections within the funding formulas and the per capita Core Spending Power figures.

5.1.10 Twenty-seven respondents (12%) raised concerns about incentives for housebuilding, often citing the end of the New Homes Bonus incentive in its current format in 2026-27.

5.2 Government response

5.2.1 The government recognises a majority (60%) of respondents to this question disagreed with proposals for distributing the total Fair Funding Allocation. However, there was no consensus across the substantive responses to this question, often with competing views expressed by different groups of respondents. It is government’s role to find the right balance between these views. Having taken the time to consider the responses in detail, the government intends to proceed with its proposals for distributing the total Fair Funding Allocation for the following reasons.

5.3 Concerns about the total funding for local government

5.3.1 One of the most common additional comments made was about the funding envelope for local government and the ability of councils to meet their pressures. The government is confirming it will provide an additional £740 million to local government over the multi-year Settlement. The government is therefore now providing over £4 billion of new grant funding through the Settlement over the period 2026-27 to 2028-29. Together with other announcements, this takes the total new grant funding for local government services over the next three years to over £5.6 billion. Taking this money together with other funding made available through the Settlement, we are:

• providing an additional uplift to the Recovery Grant, worth £440 million over the multi-year Settlement period
• allocating more funding within the Homelessness, Rough Sleeping and Domestic Abuse Grant, worth a total of £272 million, which includes:
  • £159 million for targeted funding for supported housing support services
  • £50 million support for the new burdens associated with the Renters Rights Act
  • an additional uplift for local authority homelessness prevention pressures worth £45 million
  • £19 million additional funding for tackling domestic abuse, as announced on 15 December
• providing an additional £39.6 million for Mayors, to continue to build their capacity and ensure they can deliver on the ground for their residents; and
• providing an additional £15 million to ensure standalone Fire and Rescue Authorities see a Core Spending Power increase of at least 3.8% in 2026-27 compared to 2025-26, and to protect this income in real-terms in 2027-28 and 2028-29
• providing an additional Adjustment Support Grant worth £116 million in 2026-27

5.3.2 This £740 million funding increase demonstrates the government’s commitment to support local government and Mayors up and down the country.

5.4 Delivering on the objectives and principles of funding reform

5.4.1 There was a high level of support within substantive responses for updating the funding system in principle, although various concerns were raised about implementation. There was no consensus between respondents on alternative approaches the government could take to implementation. The government has consulted on four separate occasions and has consistently updated its approach to implementing the reforms in response to the views expressed by respondents. The government considers that its distribution of the Fair Funding Allocation meets the overall objectives and principles it set at the start of this reform process. We also assess that a fundamental update to how local government is funded must take place now, as part of the multi-year Settlement, to support local government sustainability over the long term and give local government time to adapt to the changes. As a result, nine in ten councils will receive funding that broadly matches their assed need by the end of the multi-year Settlement, up from around a third before our reforms.

5.5 Funding for adult social care services

5.5.1 Respondents also raised a number of concerns about funding for adult social care services. We are under no illusions that local government will continue to face significant challenges within the adult social care system. The government has committed to transforming the adult social care sector. This Settlement allows for around £4.6 billion additional funding available for adult social care in 2028-29 compared to 2025-26. To ensure transparency of adult social care funding, the government published a breakdown of additional funding available for adult social care alongside the provisional Settlement. Some respondents asked us about the inclusion of 2027-28 and 2028-29 Local Authority Better Care Grant allocations within the Revenue Support Grant. To clarify, this is an interim presentation to show that the total funding available for adult social care will not be impacted by any future decisions on the amount of funding that each authority will be required to pool through the Local Authority Better Care Grant. The government will set out further detail on its approach to the Better Care Fund in the coming months.

5.6 Simpler recycling weekly food waste collections

5.6.1 We recognise the calls for clarity about how weekly food waste new burdens will be funded. We are committed to supporting councils in delivering weekly food waste collections as part of the simpler recycling reforms. Whilst previous capital and transitional resource funding was allocated and published by the Department for Environment, Food & Rural Affairs, the government’s intention going forward is for ongoing resource funding to be provided through the Settlement, rather than as a separate new burdens grant. This approach reflects the government’s wider commitment to simplify the local government funding system by consolidating as much revenue funding as possible across service areas. Therefore, the funding for food waste services is included within overall Core Spending Power.

5.7 Funding for rural areas

5.7.1 A high number of responses raised concerns about funding for rural areas, including the inclusion of the remoteness adjustment within the updated Area Cost Adjustment. The government has consistently been clear that we are committed to accounting for the pressures faced by rural authorities in delivering services. That is why we have already adopted a number of the updates recommended by rural areas, of which the new remoteness factor is just one part. We are including two new journey times adjustments within our assessment of cost for all services, which will account for how factors like dispersal (journey times between hub towns) and traversal (journey times between households) can increase the time it takes to deliver services in some local authorities. We are also increasing the cap within the home to school transport formula from 20 miles to 50 miles, in recognition that the original distance cap would unfairly penalise areas that unfortunately have no choice but to place children further from home. We are updating our deprivation data to include data at the Lower Super Output Area level, to help ensure that deprivation in rural areas is captured more accurately and we are properly accounting for pockets of deprivation. These changes are significant improvements to how we account for the needs of rural areas. In addition, we are introducing a new remoteness adjustment on the adult social care formula, as the best evidence we have heard indicates that distance from a major economic market has an impact on the cost of delivering adult social care services. The government believes that, taken together, these are a strong set of proposals to account for the costs of delivering services in rural communities.

5.8 Addressing SEND deficits

5.8.1 We recognise the current SEND system is not working for children or families, nor is it working for local authorities who continue to face significant financial pressures. The Department for Education has set out the principles for a reformed SEND system which meets needs earlier, before challenges escalate, and will set out details of these plans in the upcoming Schools White Paper. We are introducing support for local authorities’ Dedicated Schools Grant (DSG) deficits in phases. Information on the government’s plans can be found in section 2 of this document, with further details set out in the explanatory note.

5.9 Funding for homelessness, rough sleeping, domestic abuse and temporary accommodation

5.9.1 We have also confirmed an uplift of £272 million to the Homelessness, Rough Sleeping and Domestic Abuse Grant, of which £159 million will be targeted for supported housing support services. This will be the delivery mechanism for the supported housing funding announced in the National Plan to End Homelessness, which we have uplifted by a further £35 million since the publication of the plan. This additional funding for the Homelessness, Rough Sleeping and Domestic Abuse Grant will increase local authorities’ ability to prevent homelessness and rough sleeping before it occurs, generating savings downstream. It takes the total funding allocated via the Homelessness, Rough Sleeping and Domestic Abuse Grant over the next three years to over £2.7 billion.

5.10 Incentives for housebuilding

5.10.1 We also recognise respondents’ concerns about additional incentives for housebuilding in light of the government’s decision to end the New Homes Bonus in 2026-27. The government maintains that the New Homes Bonus was an ineffective incentive that often rewarded housebuilding that would have occurred in the absence of any incentives. We continue to consider that the funding associated with the New Homes Bonus should be reallocated more fairly within local government, according to local authority need. As set out in the provisional Settlement, by not projecting council tax base, any council tax income from new homes built across the multi-year Settlement will be additional, thereby rewarding authorities.

5.11 Transparency and consultation

5.11.1 A number of the substantive responses to this question criticised the consultation process or requested additional clarity on the methodology for calculating the Fair Funding Allocation for every local authority. The government has undertaken four consultations on the local government funding reforms. We have engaged closely with local areas and members of parliament at several junctures in the process, including through over 100 meetings with MPs at the provisional Settlement. The government has also consistently published explanatory documents as part of its consultation processes to help respondents understand the changes being proposed. We are today publishing twenty-three full, detailed explanatory notes on the Fair Funding Review reforms including updated versions of the explanatory documents published alongside the provisional Settlement, to help council finance teams and the wider public to understand the changes the government is making.

5.12 The method for projecting council tax within Core Spending Power

5.12.1 The government believes it is right to continue to calculate Core Spending Power in line with the approach used at previous Settlements. Core Spending Power has been the government’s measure of the resources available through the Local Government Finance Settlement since 2016, consisting of grant funding, locally retained business rates and council tax. As part of this, our method for calculating council tax base growth rate in Core Spending Power is to assume each authority’s council tax base increases in line with the average annual growth in their council tax base between 2021-22 and 2025-26.

5.12.2 We are aware over two thirds of billing authorities introduced second homes premiums in 2025-26, and we consider this additional income should be accounted for in Core Spending Power given it is an important part of the resources available to local authorities to deliver services. Importantly, the inclusion of second homes premium income in Core Spending Power does not affect how much grant and business rates local authorities receive through our assessment of authorities’ relative need and resources, which does not project council tax base growth to reward places for housebuilding. We also note that the introduction of the second homes premium will be smoothed out by using the average annual growth in council tax base between 2021-22 and 2025-26. Finally, there are a number of other ways councils can increase their taxbase which we do not seek to exclude from our projection of council tax base growth. In line with usual practice and in recognition of the views raised in response to this consultation, the government will continue to keep its methodology for calculating the Core Spending Power of local government under review in future years.

5.13 Concluding remarks

5.13.1 The government considers that its proposals for implementing the new Fair Funding Assessment through the combination of Revenue Support Grant, Local Authority Better Care Grant, and Baseline Funding Levels over the next three years remain the right decision to fix the foundations of local government. This approach will ensure funding is allocated efficiently to the places that need it most, whilst restoring the link between funding and deprivation that has been broken for too long. As set out above, only around a third of councils were given the funding to broadly match their assessed need before our reforms, but that will rise to nine in ten councils by the end the multi-year Settlement. Our decision to provide transition funding means a minority of councils will receive more funding than their assessed need, but our view is this remains the right decision to protect their financial sustainability over the medium term. As a result of these changes, the most deprived places will receive 45% more funding per head than the least deprived by 2028-29.

6. The Recovery Grant, transitional protections and bespoke arrangements

Question 2: Do you agree or disagree with the government’s proposed transitional arrangements?

• respondents who agreed with the proposal: 57 (24%)
• respondents who disagreed with the proposal: 116 (50%)
• respondents who neither agreed or disagreed, did not answer this question or did not have a view: 59 (26%)

6.1.1 The provisional Settlement outlined the government’s proposal for transitional arrangements including the approach to income protection, Recovery Grant allocations and bespoke arrangements for Greater London Authority, the City of London and the West of England Combined Authority.

6.1.2 Overall, one hundred and sixteen respondents (50%) either agreed with the proposal or did not have a view. Of those who provided a view, 51 were Shire District councils, 18 were Fire and Rescue Authorities, and 105 were local authorities with responsibility for adult and children’s social care services. In total,202 respondents provided additional comments to this question. The percentages included in the analysis below are based on this figure.

6.1.3 Sixty respondents (30%) welcomed the proposed package of transitional arrangements. A number of these respondents commended the plans to phase in new allocations across the multi-year Settlement, as well as the inclusion of business rates income in the proposed income baseline.

6.1.4 Twenty-seven respondents (13%), most of whom would not benefit from the proposed transitional arrangements, highlighted the impact of these arrangements in delaying full implementation of allocations based on need. Thirty respondents (15%) argued that funding for transitional arrangements is too high and they should be paid for instead by capping the increases of authorities seeing gains.

6.1.5 By contrast, forty-two respondents (21%), most of whom benefit from proposed transitional arrangements, advocated for further transitional protection. Sixty-four respondents (32%) argued for more consistency in the level of income protection between different places, with a number making the case for real terms protection for all local authorities or expressing concern on the inclusion of council tax income in the calculation of income protection. Thirteen respondents (6%), principally fire and rescue authorities, raised concerns around the use of the Gross Domestic Product Deflator rather than Consumer Price Index as the measure of inflation for calculating their income protection. Nineteen respondents (9%) noted possible issues regarding the use of reserves to manage their transition, while 8 respondents (4%) raised concerns about the use other sources of income such as income from the Extended Producer Responsibility (EPR) for packaging scheme. Fifteen respondents (7%) said that the government should use a different approach to determining whether a place is eligible for 95% income protection.

6.1.6 Seventy respondents (35%) highlighted the need for greater certainty, especially in the context of local government reorganisation, and called for the government to provide more information on funding beyond the end of the multi-year Settlement in 2028-29.

6.1.7 Twenty-six respondents (13%) contended that the Recovery Grant is insufficient to support deprived places to recover from historic funding cuts and that it should be increased across the multi-year Settlement. Nine respondents (4%) petitioned for the Recovery Grant Guarantee cap of £35 million per authority to be increased or lifted entirely. Seventeen respondents (8%) argued against the continuation of the Recovery Grant and the Recovery Grant Guarantee.

Government response

6.2 The Recovery Grant and the Recovery Grant Guarantee

6.2.1 Last year, the government launched the Recovery Grant (£600 million) to give immediate financial support to councils that were hit the hardest by a decade of funding cuts under the previous government. In response to calls from these areas to maintain this funding in future years, we put forward proposals to keep the Recovery Grant for the next three financial years as part of the policy statement on local government finance 2026-27.

6.2.2 We also recognised at the policy statement that we would need to go further to help some councils recover from the damage done by the previous government. That is why we proposed a Recovery Grant Guarantee to provide extra investment where needed. The Recovery Grant Guarantee ensures upper tier councils in receipt of the Recovery Grant receive at least a real-terms funding increase over the next three years, with payments capped at £35 million per council.

6.2.3 We have considered the responses we received on these proposals through the provisional Settlement consultation. We heard that despite these measures, many of these worst hit councils were still set to receive below average or below real terms increases in funding. These areas called on the government to take additional steps to repair the damage done by the previous government.

6.2.4 We have listened to these calls and are announcing an additional £440 million uplift to the Recovery Grant over the multi-year Settlement, specifically aimed at upper tier councils that were set to receive a less than 17% Core Spending Power increase (over the period 2025-26 to 2028-29) at the provisional Settlement. This will take the total funding allocated via the Recovery Grant and Recovery Grant Guarantee to £2.6 billion over the multi-year Settlement. This additional funding responds to the calls from the most deprived places that suffered the most under historic funding cuts.

6.2.5 The Recovery Grant Uplift will be targeted, with a £10 million cap for areas that were set to see a 14-17% Core Spending Power increase (over the period 2025-26 to 2028-29) at the provisional Settlement. This cap will ensure that the places that were set to see significantly below average funding increases get a larger share of the Recovery Grant Uplift. The government will allocate £115 million of the Recovery Grant Uplift in 2026-27, £150 million in 2027-28 and £175 million in 2028-29. The government has published a technical note on the Recovery Grant as part of the final Settlement.

6.2.6 We will continue to maintain Recovery Grant allocations across the multi-year Settlement for all other authorities in receipt of this funding, namely lower-tier authorities and upper-tier authorities seeing an increase in Core Spending Power over the multi-year Settlement of 17% or more. This Recovery Grant uplift will also be in addition to the Recovery Grant Guarantee, which ensures that upper-tier authorities in receipt of Recovery Grant see an increase of at least 5% in 2026-27, 6% in 2027-28 and 7% 2028-29, compared to their 2025-26 income (subject to a cap of £35 million per authority).

6.3 Transitional protections

6.3.1 There were contrasting views amongst respondents on transitional arrangements, with some calling for more generous protection and others calling for less generous protection and faster implementation of new allocations. The government’s approach strikes a balance between these two views, providing transitional arrangements which enable local authorities to plan for changes, while recognising that the current system is unfair and there is a need to move decisively towards improved and updated allocations. 6.3.2 The government will proceed with proposals to move local authorities to their 2028-29 fair funding shares in increments of one third over the multi-year Settlement; and provide a range of income protection levels across the multi-year Settlement appropriate to specific groups of authorities’ circumstances:

a. 100% income protection. The government will continue to ensure the vast majority of councils see their income increase or 100% of their income protected;

b. Real-terms protection for standalone Fire and Rescue Authorities. In recognition of the pressures highlighted by respondents, we will provide an additional £15 million to standalone Fire and Rescue Authorities across the multi-year Settlement. We will ensure they see an above real-terms Core Spending Power increase of at least 3.8% in 2026-27 compared to 2025-26, and then protect their 2026-27 income in real-terms in 2027-28 and 2028-29, using the Gross Domestic Product (GDP) Deflator. The GDP deflator is the most accurate measure of inflation for authorities as it provides a broader, more comprehensive picture of price changes across the entire economy, including government services, investment, and public sector costs; and

c. 95% income protection. The government still considers that local authorities furthest above their new allocations, which have benefitted the most from the existing system, need to accept some losses in income over the multi-year Settlement. This will allow funding to be targeted based on need. Almost all of the places furthest above their allocations reported substantial unringfenced reserves in 2024-25.

6.3.3 The government continues to note that local authorities will benefit from a wide range of income streams and possible savings in addition to income protection, including: government investment in the transformation of children’s social care and the Homelessness, Rough Sleeping and Domestic Abuse Grant; income through the Extended Producer Responsibility (EPR) for packaging scheme; any new income from business rates growth from 2026-27; and while this won’t be the case in all places, reduced employer pension contributions.

6.3.4 With regards to planning certainty, we are delivering the first multi-year Settlement in a decade. This will enable local authorities to better plan their finances over the next three years and to deliver services more efficiently. We recognise that as a result of income protection, some councils will remain above their 2028-29 fair funding shares by the end of the multi-year Settlement. Between now and the end of the multi-year Settlement, there will be another Spending Review which will determine arrangements for 2029-30 and beyond. The government will continue to work closely with local government and other government departments to understand specific pressures facing local government ahead of this and other fiscal events.

6.4 Transitional baseline and business rates pooling

6.4.1 We will continue to calculate transitional arrangements across the multi-year Settlement using a baseline consisting of Revenue Support Grant, other grants from 2025-26 Core Spending Power, business rates income and council tax. These proposed transitional arrangements are more generous than anticipated by many authorities, since they include locally retained business rates growth accumulated since 2013-14.

6.4.2 Following consultation, we are making a change to better reflect income from business rates pooling which is included in local authority transitional funding baselines. Across the process of delivering local government funding reforms, the aim of transitional arrangements has always been to estimate current local authority income as far as is practicable, including from locally retained business rates. Following feedback received across the Settlement process, including a number of consultation responses, we have concluded that there is a better way to estimate pooling gains which distributes the benefit more equitably across all pool members and is more reflective of how pooling arrangements work.

6.4.3 We recognise that this is a change from the approach included in the publication of the provisional settlement consultation which will change transitional funding allocations for some authorities. However, having considered feedback, changing the method is important to ensure the final settlement better meets the policy intent of delivering more accurate transitional funding arrangements. The revised method will still ensure that pooling gains are allocated across the locally pooled area. Within each pool, 50% of levy savings will be allocated between tariff authorities in each pool, and 50% will be allocated between top-up authorities in each pool.

6.4.4 One of the key objectives of the Fair Funding Review 2.0 is to target funding where it is most needed and, following consultation on indicative allocations, further evidence and analysis, this objective is better achieved by improving the estimate of current business rates income to better reflect how pooling gains are generally shared across all pool members locally. The Institute for Fiscal Studies noted that the method we used to do this at the provisional Settlement assumed many districts and the City of London started with significantly more funding from pooling than they do in practice.

6.4.5 To help councils adjust to this change, the government will provide a one-off Adjustment Support Grant in 2026-27 to authorities who would otherwise see their Core Spending Power reduce in 2026-27, compared to indicative allocations set out at the provisional Settlement. Allocations for this grant are set out within the final Settlement. The pooling assumption for 2027-28 and 2028-29 will be subject to consultation at the next Settlement, and we will provide an update to councils in due course.

6.4.6 We have re-published the business rates income calculator to assist local authorities in understanding how their current business rates income has been measured for their transitional arrangements. This will be based on the revised method for calculating pooling gains. The one-off Adjustment Support Grant provided for 2026-27 will not be included in transitional arrangements. Further details are also set out in the accompanying explanatory note.

6.5 Bespoke arrangements, including transition

6.5.1 Finally, the government continues to consider that there is a need for bespoke arrangements for a small number of authorities:

a. The City of London. The government continues to propose bespoke treatment for the City of London. The City is unique amongst the authorities eligible for income protection in the extent it has benefitted from growth in business rate income above their baseline funding level. Protecting such a large amount of income, which is not allocated based on need, must be carefully considered in terms of value for money to taxpayers.

In response to the City’s consultation response and further engagement with the City, at the City’s request we are now publishing full indicative Settlement allocations for 2027-28 and 2028-29 to support the City’s financial planning. The City’s indicative allocations have been calculated by applying a £50 million cap to the level of business rates growth in scope of income protection, which will put the amount of the City’s income protection in a similar position to that of other authorities. Through the proposed indicative allocations, the City would receive the highest Core Spending Power per person of any local authority across the multi-year Settlement. The City would also still receive the largest payment of income protection in each year of the multi-year Settlement. In addition, for 2027-28 and 2028-29 we propose the City will have council tax referendum principles removed, reflecting their significantly lower-than-average bills, enabling them to rebalance disparities in their council tax levels should they wish to.

The indicative allocations are a continuation of our consultation with the City and, alongside the future of their bespoke arrangements through the business rates retention system, subject to further engagement. Following this engagement, we will consult on proposals later this year as part of the provisional Local Government Finance Settlement 2027-28. Further details and the methodology for calculating the City’s indicative allocations are provided in the accompanying explanatory note.

b. The Isles of Scilly. The government will maintain the bespoke arrangement for the Isles of Scilly, given the small population size and unique nature of the authority. In response to feedback received through the consultation process, this will also include an uplift of £150,000 per year from the allocation set out in the provisional Settlement for the Isles of Scilly.

c. Greater London Authority (GLA). The government continues to believe in the need for bespoke arrangements for the GLA in light of their unique responsibilities and funding arrangements. We intend to implement the arrangements as consulted on at the provisional Settlement and detailed in the explanatory note on the GLA’s bespoke treatment.

d. West of England Combined Authority (WECA). WECA have benefitted from the business rates retention system but do not provide services which are assessed as part of the Fair Funding Assessment. We will support WECA by phasing out their accumulated business rates income in increments of one third over the multi-year Settlement. This will smooth the ‘cliff edge’ which WECA would otherwise face if their rates growth were reallocated in full in 2026-27. We are offering this transitional arrangement to all authorities, including WECA, to support them to plan for changes in an orderly and efficient manner.

7. Council tax

Question 3: Do you agree or disagree with the proposed package of council tax referendum principles?

• respondents who agreed with the proposal: 30 (13%)
• respondents who disagreed with the proposal: 127 (55%)
• respondents who neither agreed or disagreed, did not answer this question or did not have a view: 75 (32%)

7.1.1 The provisional Settlement outlined the government’s proposed approach to council tax referendum principles from 2026-27 to 2028-29.

7.1.2 Overall, 45% of respondents either agreed with the proposal or did not have a view. Of the respondents who provided a view, forty-nine were Shire District councils, 16 were Fire and Rescue Authorities, and 97 were local authorities with responsibility for adult and children’s social care services. In total, 193 respondents provided additional comments in response to this question. The percentages included in the analysis below are based on this figure.

7.1.3 Seventy-six respondents (39%) made a general comment that the government should not set referendum principles for any local authority. These were all from local authorities or their representative groups who noted that decisions on council tax levels should be for local authorities to make.

7.1.4 Thirty-seven respondents (19%) did not feel council tax was a sustainable way of funding local government. With 20 respondents (10%) arguing that referendum principles were not high enough to meet service pressures on councils, and 22 respondents (11%) raising concerns about smaller council taxbases and councils not being able to raise as much revenue as other authorities from the same percentage increase in their band D level.

7.1.5 Twenty-eight respondents (15%) argued for greater flexibility in the referendum principles for district councils, and 11 (6%) for greater flexibility for fire and rescue authorities. They also highlighted the flexibilities that have been provided to police authorities in recent years.

7.1.6 Fifteen respondents (8%) argued that they or other councils should have also been given the same flexibility, or the flexibility to increase to the average. Arguments in favour of such flexibility highlighted the importance of local decision-making and emphasises that it would allow authorities to maintain resilience and adapt to local circumstances in the context of reduced government grants.

7.1.7 Thirteen respondents (7%) welcomed the proposed removal of referendum principles for the City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, Westminster and Windsor and Maidenhead in 2027-28 and 2028-29. These respondents argue that this would facilitate a fairer redistribution of funding across local government. Two respondents (1%) voiced their disagreement with this decision due to the possible increase in the tax burden for households. Assumptions made in the settlement methodology about council tax increases by these councils were also criticised.

7.1.8 Seventy-two respondents (37%) raised concerns about the assumptions on the use of council tax flexibilities in the calculation of core spending power. These respondents argued that Core Spending Power should not assume full use of referendum principles given council tax setting is a local decision.

7.1.9 Thirty-four (18%) disagreed with the inclusion of taxbase growth attributable to the second homes premiums in the calculation of core spending power, noting that the premium is a one-off uplift in the taxbase and therefore will not accurately project council tax base growth for future years.

7.1.10 Seventeen respondents (9%) were concerned about the impact of council tax increases on the cost of living which may result in more taxpayers not being able to afford to pay while putting further strains on support systems of local authorities.

7.1.11 Fifteen respondents (8%) called for fundamental reform of the council tax system, arguing that the tax is outdated, regressive and inefficient source of funding local government.

7.2 Government response

7.2.1 The government has considered the responses put forward from all respondents to the consultation. This process has enabled government to strike a fair balance between giving local authorities the flexibility and funding required to deliver vital services and allowing residents to have the final say on increases above referendum principles.

7.2.2 We have taken a similar approach to previous years and have considered requests for bespoke council tax referendum principles from councils with low council tax levels that are in financial difficulty. We have carefully considered requests from these councils and only agreed to small additional flexibilities in seven councils – less than the councils requested in all but one area. The government has agreed to bespoke referendum principles of an additional 4% in Shropshire, North Somerset and Worcestershire, an additional 2.5% in Trafford, Windsor and Maidenhead, and Warrington, and an additional 1.75% in Bournemouth Christchurch and Poole. These are difficult decisions that are not taken lightly. We have not agreed to any requests that could lead to households in those areas paying above the average council tax level.

7.2.3 In recognition of financial pressures and the importance of public safety, the Secretary of State and the Home Secretary have also agreed to provide one-off additional £3.50 flexibility (on top of the £15 set out at the provisional settlement) to six Police and Crime Commissioners (Bedfordshire, Cheshire, Durham, Gloucestershire, Humberside and Northumbria). We have also agreed to provide £5 one-off additional flexibility to Northamptonshire Fire Authority on top of the £5 proposed at the provisional settlement.

7.2.4 The government remains committed to increase fairness, provide better value for money, and enable areas to rebalance significant disparities in their council tax levels should they wish to by confirming our intention to not set referendum principles for six authorities in 2027-28 and 2028-29.

7.2.5 Ultimately, it continues to be for authorities to decide their levels of council tax having carefully considered the impact on their taxpayers. We have been clear to all authorities that they should take whatever steps locally they consider will help to protect the most vulnerable residents from the impact of any additional increase.

8. Social Care

Question 4: Do you agree or disagree with the government’s proposed approach to distributing funding for the Families First Partnership programme via the final version of the Children and Young People’s Services (CYPS) relative needs formula?

• respondents who agreed with the proposal: 30 (13%)
• respondents who disagreed with the proposal: 51 (22%)
• respondents who neither agreed or disagreed, did not answer this question or did not have a view: 149 (65%)

8.1.1 The provisional Settlement outlined the government’s proposal to distributing children’s social care funding.

8.1.2 Overall, 68% of respondents either agreed with the proposal or did not have a view. Of the respondents who provided a view, nine were Shire District councils and one hundred and one were local authorities with responsibility for adult and children’s social care services. In total, one hundred and twenty-one respondents provided additional comments to this question. The percentages included in the analysis below are based on this figure.

8.1.3 Some respondents commented on the changes made to the CYPS formula between the Fair Funding Review 2.0 version, and the version consulted on at the provisional settlement. Forty-six respondents (38%) opposed the changes made to the CYPS formula to update it using the 2025 Income Deprivation Affecting Children Index, which now reflects housing costs. Seventeen respondents (14%) opposed the changes made to the CYPS formula (since the previous iteration which was proposed at the Fair Funding Review 2.0) because it reduces the need-share/allocation of a particular area. Eleven respondents (9%) supported changes to the formula.

8.1.4 Respondents also discussed the CYPS formula more broadly. Twenty-three respondents (19%) thought that the CYPS formula did not accurately reflect levels of deprivation and need. Fifty-seven respondents (47%) criticised a lack of evidence, transparency and explanation of the CYPS formula, and/or argued for further engagement with the sector. Twenty-four respondents (20%) argued that the variables the formula uses to assess need should change.

8.1.5 Some respondents discussed the use of the CYPS formula to distribute Families First Partnership Programme funding. Twenty-seven respondents (22%) supported the principle of using the CYPS formula to distribute Families First Partnership programme funding, including 8 respondents who disagreed with the question overall. Four respondents (3%) argued that the CYPS formula should not be used to distribute prevention funding because it does not account for current demand.

8.1.6 Respondents also commented on the funding for the Families First Partnership programme. Twenty-two respondents (18%) supported the additional funding for preventative services. Ten respondents (8%) called for greater flexibility in the use of this funding, including the removal of ringfences.

8.2 Government response

8.2.1 Having carefully considered responses to the consultation, the government plans to use the CYPS formula consulted on at the provisional Settlement to distribute funding for the Families First Partnership Programme.

8.2.2 While more respondents disagreed than agreed with the proposal, there was a lack of consensus on the reasoning. Many respondents agreed with the principle of using the CYPS formula to distribute funding for the Families First Partnership programme, including many of those that disagreed with particular elements of the design of the formula or felt the final distributions did not accurately reflect levels of need.

8.2.3 Many respondents raised concerns about the lack of evidence for, explanation of, and engagement with local authorities on the final CYPS formula. As we have set out previously, the formula’s use of granular child level data – which improves its accuracy in predicting need – means it is not possible for the government to publish all of the formula’s data inputs. The government has previously sought to address concerns around transparency, and has published a number of documents detailing the formula’s methodology, data sources, and evidence base.^{[footnote 1]} The Department for Education has also held a webinar with local authority officers and will share the recorded element of the session with all local authorities.

8.2.4 Many respondents disagreed with changes that had been made to the formula since the Fair Funding Review 2.0 in the summer of 2025. In particular, some respondents disagreed with the use of the updated, 2025 publication of the Income Deprivation Affecting Children Index because this 2025 dataset reflects the impact of housing costs on income deprivation. The government stands by the principle consulted on in the Local Authority Funding Reform: Objectives and Principles consultation, in which 98% of respondents were supportive of using the very latest data when assessing demand. The Fair Funding Review 2.0 also indicated the government’s intention to update the CYPS formula with the 2025 Income Deprivation Affecting Children Index data. The Income Deprivation Affecting Children Index is part of the English Indices of Deprivation, which is an accredited official statistic.

8.2.5 Some respondents suggested that the uplift in funding in 2026-27 their authority will receive was not sufficient and did not reflect the level of need locally. Many authorities receiving lower than average uplifts in 2026-27 are still seeing high and above average per capita annual funding levels. Additionally, looking over the full four-year span of the Families First Partnership programme, the government is providing nearly £3 billion, a 192% increase in direct investment for children’s social care prevention when compared to 2024-25. The government recognises the impact of historic cuts and underfunding on children’s preventative services, and is targeting additional funding through the Recovery Grant at councils most impacted by this.

9. Other Grants

Question 5: Do you agree or disagree with the government’s proposed approach of continuing the Internal Drainage Board support grant for 2026-27 but seeking an alternative solution from 2027-28?

• respondents who agreed with the proposal: 33 (14%)
• respondents who disagreed with the proposal: 26 (11%)
• respondents who neither agreed or disagreed, did not answer this question or did not have a view: 172 (75%)

9.1.1 The provisional Settlement sought views about whether the Internal Drainage Board (IDB) support grant should continue beyond 2026-27, noting that Defra and MHCLG have commissioned a research project into IDB funding and costs that will close in Summer 2026.

9.1.2 Overall, 89% of respondents either agreed with the proposal or did not have a view. Of the respondents who provided a view, 23 were Shire District councils and 40 were local authorities with responsibility for adult and children’s social care services. In total, 56 respondents provided additional comments to this question. The percentages included in the analysis below are based on this figure.

9.1.3 Seventeen respondents (30%) expressed concern about the level of funding provided by the support grant and asked that it be increased, while 16 respondents (29%) proposed that a future solution should fund the full cost of Internal Drainage Board (IDB).

9.1.4 Seventeen respondents (30%) commented that IDB levies should be funded directly by central government, rather than through local authorities.

9.1.5 Thirteen respondents (23%) thought that government should have already prioritised developing a long-term solution and should implement one as quickly as possible.

9.1.6 Nine respondents (16%) shared concerns about a possible gap in funding between the end of the 2026-27 funding period and the implementation of a long-term solution, and argued that the support grant ought to continue.

9.2 Government response

9.2.1 The government recognises the challenges that some local authorities face in meeting the cost of IDB levies. We will make sure that the IDB support grant is allocated to those authorities who are experiencing the most significant pressures. The allocation of this funding will be announced in due course, following the receipt of internal drainage board levy data.

9.2.2 Defra and MHCLG have commissioned a research project into IDB funding and costs. This is focussed on financial efficiency, value for money, and the broader benefits which IDBs deliver for local communities. It will include examination of whether any changes are needed to their funding model. The research project was launched in early September and will close in summer 2026. Following the conclusion of the research project, we will consider alternative solutions. While our priority will be to take action for 2027-28, we note the concerns raised about a funding gap should the grant be discontinued prematurely. The government will keep the support funding for future years under review as part of the normal process.

10. Mayoral Strategic Authority Funding

Question 6: Do you agree or disagree with the government’s proposal on Mayoral Strategic Authorities in the Local Government Finance Settlement?

• respondents who agreed with the proposal: 33 (14%)
• respondents who disagreed with the proposal: 26 (11%)
• respondents who neither agreed or disagreed, did not answer this question or did not have a view: 173 (75%)

10.1.1 The provisional Settlement outlined the government’s proposed approach on funding Mayoral Strategic Authorities through the Local Government Finance Settlement. The government proposed to create greater alignment between Mayoral Strategic Authority funding and the Settlement to create a more cohesive local government funding landscape and provide Mayoral Strategic Authorities with longer-term funding certainty.

10.1.2 Overall, 89% of respondents either agreed with the proposal or did not have a view. Of the respondents who provided a view, 17 were Shire District councils, 7 were Fire and Rescue Authorities, and 70 were local authorities with responsibility for adult and children’s social care services. In total, one hundred and thirteen respondents provided additional comments to this question. The percentages included in the analysis below are based on this figure.

10.1.3 Thirty-five respondents (31%) commented that they supported aligned and simplified funding for strategic authorities and local authorities.

10.1.4 Twenty respondents (18%) shared that greater transparency of strategic authority funding would be beneficial for the sector.

10.1.5 Eleven respondents (10%) commented that strategic authority funding should be equitable with local authority funding.

10.1.6 Respondents were also concerned about the impact of devolution arrangements to the levels of funding being made available in local areas. Ten respondents (9%) shared concerns that where a Strategic Authority does not cover a local authority that funding and services will not benefit from such arrangements. Twelve respondents (11%) commented that any funding for Strategic Authorities within the Settlement should not result in funding being diverted from local authorities. Sixteen respondents (14%) shared concerns regarding the lack of clarity on the settlement for the Greater London Authority and the impact that would have on their financial planning.

10.1.7 Some respondents commented on policy design and distribution of funding to Strategic Authorities regarding future settlements. Ten respondents (9%) shared their support to provide Strategic Authorities with a direct share of business rates. Eight respondents (7%) shared concerns about the potential impact the government’s proposals to provide Mayoral Strategic Authorities with a direct share of business rates would have on shares for local authorities. Seven respondents (6%) commented that consideration was needed regarding future fire funding arrangements including options for ringfenced funding to protect critical fire services.

10.1.8 Other respondents also provided views on wider policy relating to the government’s approach on devolution. Fourteen respondents (12%) commented that they were supportive of the Integrated Settlement model for funding strategic authorities. Five respondents (4%) shared concerns regarding policy decisions for the structural tiers of strategic authorities. Twenty-six respondents (23%) did not feel that there was enough information and requested further information before giving views.

10.2 Government response

10.2.1 The government has considered responses to the consultation and concluded that funding Strategic Authorities through the Settlement would be fair and transparent. It is right to ensure that where grant allocations for other types of authorities are funded through the Settlement, that Strategic Authorities also receive their allocation through it.

10.2.2 Recognising the need to ensure Mayoral Strategic Authorities are set up to deliver, we will provide an additional £39.6 million for the Mayoral Capacity Fund, bringing the total funding to £138.6 million over the multi-year Settlement. This will support existing eligible Strategic Authorities’ staffing and administrative costs, and central corporate functions. More information can be found in the Mayoral Strategic Authority Funding Explanatory Note.

10.2.3 The government notes the request for further information, where there is interaction between Strategic Authority funding and the Settlement, the government will provide further information regarding any proposed changes to the relevant spending frameworks and consult on these as part of future provisional Settlements as required.

11. Equalities impacts of these proposals

Question 7: Do you have any comments on the impact of the proposals outlined in this consultation document on persons who share a protected characteristic? Please identify which protected characteristic you believe will be impacted by these proposals and provide evidence to support your comments.

• respondents who provided additional comments: 117 (50%)
• respondents who did not provide additional comments: 115 (50%)

11.1.1 The government invited views through the provisional Settlement consultation on the impact of the proposals on persons who share a protected characteristic.

11.1.2 Responses to this question have been considered in making government decisions on the final Settlement. A statement on how government has taken these responses into account in the assessment of the impacts of the Settlement is included below.

11.1.3 A total of one hundred and seventeen respondents provided additional comments to this question. The percentages included in the analysis below are based on this figure.

11.1.4 Thirteen respondents (11%) welcomed the positive impacts of the provisional Settlement on persons with specific protected characteristics. Many of these respondents noted this particularly in the context of increased funding being targeted to areas with higher deprivation. Thirteen respondents (11%) urged the government to go further on directing funding towards areas with higher levels of deprivation.

11.1.5 Some of the respondents who welcomed these proposals also raised concerns that the government’s transition policy will dampen and/or delay the positive effects on deprived areas and called for this to be reconsidered.

11.1.6 Twenty five respondents (21%) argued that the proposals will have a negative impact on individuals with unspecified protected characteristics. Thirty-eight respondents (32%) shared concerns that this Settlement may negatively impact older people. Thirty-two respondents (27%) shared concerns that this Settlement may negatively impact people with disabilities.

11.1.7 Whilst not a designated protected characteristic, there was a strong correlation between rurality and concerns raised regarding older people and people with disabilities, with rurality highlighted as a ‘compounding factor’. Fifteen respondents (13%) argued that this Settlement may negatively impact those living in rural areas.

11.1.8 Nine respondents (8%) raised concerns over negative impacts on children in social care and four respondents (3%) shared concerns regarding the removal of ethnicity as a factor in the Children’s and Young People’s Services Formula. Five respondents (4%) also shared concerns that the proposals may negatively impact women, eleven respondents (9%) were concerned that it would negatively impact on the basis of race and three respondents (3%) were concerned over negative impacts on the basis of pregnancy and/or maternity.

11.2 Approach to assessing the impact

11.2.1 Public bodies have a duty under section 149(1) of the Equality Act 2010 (the ‘Act’) to consider the needs of people who share particular protected characteristics. This is known as the public sector equality duty (PSED). In carrying out their functions, public bodies should have due regard to the need to achieve the following PSED objectives set out under the Act:

• eliminate unlawful discrimination, harassment, victimisation and any other conduct prohibited by the Act
• advance equality of opportunity between people who share a particular protected characteristic and people who do not share it
• foster good relations between people who share a particular protected characteristic and people who do not share it

11.2.2 The protected characteristics which should be considered are:

• age • disability • sex • gender reassignment • marriage or civil partnership • pregnancy and maternity • race • religion or belief • sexual orientation

11.2.3 When making decisions on the Settlement, the government must have due regard to the PSED objectives outlined above. The government must consider the equalities impacts of Settlement decisions on people with shared protected characteristics, including when making policy and spending decisions.

11.2.4 We can anticipate to some extent how local authorities might respond to changes in funding and the impact this may have on service users. This is informed by responses to this consultation, the government’s broader continued engagement with local government, and historic trends. Engagement with local government also allows us to ensure the assumptions underlying our modelling on the amount of funding local government requires are robust.

11.2.5 In considering the impact of the funding distribution on persons who share a particular protected characteristic compared to those who do not share that characteristic, the government has also considered the final distribution of Core Spending Power between local authorities as outlined in this response, as well as the characteristics of the people that live in the local authorities. The government also had due regard of qualitative and quantitative research on the users of the local government services, the impact of these services and the likely impact of funding decisions.

11.3 Brief outline of the policy proposal

11.3.1 A summary of the measures consulted on can be found in chapter one of this response. Further detail can be found in the provisional Local Government Finance Settlement 2026-27 consultation.

11.4 Government response on anticipated impacts of policy proposals on people who share protected characteristics

11.4.1 Overall, we assess that the changes being proposed through the final Settlement will have positive equalities impacts. The funding reforms we have delivered through the Settlement mean that funding allocations will better target deprivation, take account of local authority taxbases and local ability to raise income, and more accurately reflect the drivers of local authority need by drawing on more up-to-date evidence. Taken together, this will re-align funding with local authorities’ relative need, updating the system for the first time in a decade. This will enable places that have historically received relatively less in funding than their need would suggest, to begin to reinvest in local government services, advancing their equalities impacts.

11.4.2 Given the overall increase in Core Spending Power through this Settlement, all protected characteristic groups see a nominal increase in Core Spending Power per capita. When considering Core Spending Power collectively across different tiers of local government (upper and lower tier), we expect that the majority of individuals will see an increase in Core Spending Power compared to 2025-26.

11.4.3 Ultimately, local authorities make decisions on local spending so it is not possible to say for certain how changes in funding will affect specific groups of persons sharing a protected characteristic.

11.4.4 We are delivering the first multi-year Settlement in a decade, providing greater funding certainty to local authorities. We expect this additional flexibility will have positive equalities impacts by supporting local authorities to direct funding according to local need, supporting people with particular protected characteristics who rely on particular services such as adult or children’s social care. In addition, we are simplifying the way funding is allocated, increasing flexibility and certainty to local authorities and their ability to direct funding where it is needed locally.

11.4.5 The government understands that some people with particular protected characteristics are overrepresented in the use of local government services, such as: age, disability, sexual orientation, and sex. Local authorities provide various services which persons that share a protected characteristic may rely on or benefit from more than those who do not share those characteristics. Changes in the amount of flexible funding available to local authorities – whether an increase or a reduction – will affect a local authority’s ability to provide these services, and therefore may have disproportionate positive or negative impacts on persons sharing protected characteristics.

11.4.6 We expect that changes made to distribution in the final Settlement will direct more funding to areas with higher levels of deprivation. Whilst deprivation is not a protected characteristic, there are evidenced links between deprivation and certain protected characteristics. Furthermore, inadequate local government funding has the potential to negatively impact lower income households through, for example, increased fees for the services provided by local government. Although, similarly, socioeconomic status is not a protected characteristic, there are multiple interactions between income and groups within particular protected characteristics. Without effective mitigating action, spending decisions may therefore have an indirect equalities impact.

11.4.7 The government has given due regard to the potential equalities impacts raised in the consultation, including on the most commonly cited protected groups (elderly – 38 respondents (32%), and those with a disability – 27 respondents (32%). In nominal terms, compared to 2025-26 total Core Spending Power will increase by approximately £4.5 billion in 2026-27, and by £11.4 billion in 2028-29, this funding will be provided to places that have historically received relatively less in funding than their need would suggest, to begin to reinvest in local government services, advancing their equalities impacts. Where some areas are seeing lower increases, this reflects that funding is being redirected based on need, as these funding reforms direct funding to where it is most needed.

11.4.8 Councils are responsible for deciding the level of their council, tax and considering the inequalities impacts that may arise. Additional flexibilities in referendum principles will allow them to set a larger increase without a referendum than would otherwise have been the case. Council tax increases may enable local authorities to manage their financial position and provide better services, with positive impacts for residents, including those with particular protected characteristics that rely on councils’ services. Increases may have a negative impact on any taxpayer struggling to pay their bill. However, councils have tools to mitigate the impact – including in relation to equalities. Councils are required to put in place a council tax support scheme and consider revisions each year in consultation with their residents. They also have discretionary powers to provide a discount to any taxpayer where they consider this appropriate.

11.4.9 Overall, the government has not identified significant disproportionate negative impacts on any groups that share a particular protected characteristic as a result of the proposals for the multi-year Settlement. As local authorities decide how their resources are allocated, it is not possible to say for certain how changes in funding will affect specific groups of persons sharing a protected characteristic. In making these decisions, local authorities will also need to have due regard to their PSED objectives under the Act.

11.5 Monitoring arrangements

11.5.1 The department collects detailed revenue expenditure data on a yearly basis through the Revenue Account and Revenue Outturn publications. The department also regularly and directly engages with local authority officers, councillors, and Members of Parliament. Furthermore, the department responds to and monitors correspondence relating to local government funding and its implications. This engagement adds further detail to our understanding of financial pressures facing local government, the sufficiency of the settlement to meet these pressures, and the implications of government’s policy decisions on people who have particular protected characteristics.

1. Examples include the original evaluation report, the peer review of the formula, the original methodological note, a technical annex on the formula alongside the Fair Funding Review 2.0 consultation, a worked examples note to aid understanding of the formula’s workings published alongside this consultation, and a technical annex to this consultation on the formula’s methodology. ↩