Four in five county and unitary councils in a worse position than before the Autumn Budget and finance settlement, survey reveals

CCN Latest News, CCN News 2025 | 30 January 2025

England’s largest councils say they are now more likely to reduce adult social care, school transport and libraries this year whilst raising council tax by the maximum due to government proposals to focus funding on major towns and cities at the expense of county and rural areas.

More than four in five (85%) county and rural local authorities say they are now in a worse position than before the Autumn Budget and Local Government Finance Settlement despite the government heralding a ‘significant real-terms funding increase’ for councils.

This is due to the government’s proposed distribution of that money and increases in the National Living Wage and National Insurance contributions. The County Councils Network (CCN), which carried out a snap survey of its 37 members, says that the government is ‘cherry picking’ what councils to focus funding on through the proposed Local Government Finance Settlement for 2025/26, with a new £600m Recovery Grant heavily targeted towards urban and city councils in the North and Midlands.

Download CCN’s consultation response to the provisional Local Government Finance Settlement 2025/26 here.

Despite county and rural councils facing multi-million-pound shortfalls as they set their budgets next month and four county local authorities asking for exceptional financial support from the government, just 3% of the Recovery Grant goes to county areas.

This situation has been worsened by the removal of the £100m Rural Services Delivery Grant for 2025/26, which recognised the higher costs of delivering local authority services in rural areas.

Consequently, over nine in ten (93%) county and unitary councils will have to raise council tax by the maximum permitted which is 4.99% in all but exceptional circumstances. But this will still not be enough, and several county and unitary councils say they will now have to cut services more significantly in 2025/26:

  • Almost one in three (31%) say their cuts will be severe following the Budget and Local Government Finance Settlement, including six in ten (61%) warning they are more likely have to make more staff redundant.
  • More than half of councils (51%) are more likely to cut services in adult social care, such as care homes, home care, and support for voluntary and charity groups.
  • Half (50%) say they are now more likely to have to reduce eligibility for adult social care and school transport.
  • Four in ten (42%) say they are now more likely to turn off an increased amount of streetlights and reduce climate change initiatives (45%) as a result of the government’s decisions.
  • Over one in three (35%) are now more likely to cut the number of libraries in their area or reduce their opening times.
  • Despite the government announcing £515m in compensation for the employers’ National Insurance increase, not one council said their anticipated sum would cover all of their new costs.

The CCN says that the government has taken a ‘very secretive’ approach to its proposals in the Local Government Finance Settlement and has not published evidence on why funding is so targeted to a handful of councils. Ministers have said the funds are being distributed using a formula that accounts for deprivation, but CCN says this has ‘very serious technical deficiencies’ and was not consulted on prior to its introduction.

The government has also recently launched a fair funding review, which will make permanent changes to the distribution of central government funding to councils, and is due to be concluded later this year. The CCN says the government’s proposals in the Local Government Finance Settlement sets a ‘worrying precedent’ that the fair funding review may not be evidence-based and could result in county authorities losing hundreds of millions in government funding.

Warning that this could be a sign of things to come, the CCN’s survey shows that 75% of councils are confident of balancing their budget in 2025/26 but with larger-scale reductions to services than previously envisioned or one-off use of reserves.

However, with fears over the impact of future funding changes, confidence drops dramatically by the end of the Parliament: just one council is confident of setting a balanced budget in 2029/30. Six in ten (60%) are not confident.

Every single council responding to the CCN survey said that they thought the government does not properly recognise demand and service pressures in county and rural areas.

The CCN argues that whilst deprivation can result in higher costs for some services, it is not the only factor.  The network’s evidence shows that demand, inflation, and market failure in adult social care, children’s services and special educational needs are the main factors plunging councils into financial crisis.

As a result, the network is calling on the government to publish the evidence that backs up its ministers’ decisions to target funding to urban and city councils, and the forthcoming Fair Funding review must be transparent, and based on clear and comprehensive evidence.

Cllr Barry Lewis, Finance Spokesperson for the County Councils Network, said:

“With councils in county areas currently finalising their budgets next year and making extremely tough decisions, a difficult situation has been made worse with the proposed distribution of money to local authorities in the Local Government Finance Settlement. The government is cherry picking what areas to focus funding on.

“It is clear now that the vast majority of county and unitary councils are in a worse position than before the Autumn Budget and finance settlement. Virtually all county and unitary councils will have to raise their council tax by the maximum permitted in March, but even this will not be enough. Many are now more likely to have to set out further reductions in adult social care, school transport, libraries and more. Considering there is very little fat left to cut from many of these services already, a further reduction will have a material impact on our residents.

“Therefore, the government must rethink its proposals in the finance settlement and ensure that all parts of the country that are facing significant financial challenges receive a fair share of resources rather than selecting a handful of councils to benefit.

“Looking ahead to the fair funding review, our plea to government is ‘show us the evidence’. There has been nothing published so far that backs up ministers’ decisions and if this trend does continue then it will push many county and unitary councils to the brink. Our survey that reveals just one council is confident of setting a balanced budget by the end of this Parliament should be an alarm call to the government.”

Notes to editor

  • The CCN survey took place between January 10 and January 23 and received 32 responses, which is an 86% response rate.