Local government finance policy statement 2025/26: CCN responds

Today the government has published the local government finance policy statement for 2025/26, which sets out how it intends to distribute resources to councils next year.

Released ahead of the local government finance settlement, the statement says that the government wishes to distribute a slice of the extra funding made available in the Budget on a deprivation formula basis, called the Recovery Grant. This grant will total £600m next year.

The government will also distribute £680m using the Social Care Grant, and has committed to a longer-term fair funding review.

Below, the County Councils Network responds.

Cllr Tim Oliver, Chairman of the County Councils Network, said:

“The County Councils Network (CCN) will be carefully analysing the local government finance policy statement 2025/26 in the coming days, but on first glance the way government intends to distribute resources will be concerning for many county and unitary councils.

“Considering that increases in the minimum wage and National Insurance contributions will more than wipe out extra funds for social care, it is possible most CCN member councils – and many more across the country – will receive nothing from the ‘Recovery Grant’ which will be heavily targeted and weighted exclusively by deprivation. We are also very disappointed that the government have chosen to repurpose some grants and redistribute this funding elsewhere, which will adversely impact rural councils.

“As we have argued over the last few weeks, whilst deprivation is a key indicator of a councils’ need, it is not the only indictor nor the most important measure of financial distress. The reality is that it is demand and market failure across adult and children’s social care and special educational needs services that are pushing councils to the brink. With our previous analysis showing county authorities have a larger funding gap than metropolitan boroughs next year, our councils deserve an appropriate share of the Recovery Grant.

“The way these funds next year are to be distributed do not adequately account for many under-pressure councils’ actual and future demands and costs and with the government also committing to a fair funding review, we would be very concerned if this is the direction of travel moving forward. The government must ensure that this review is a genuinely fair funding review and based on a robust and independent evidence-base.”