Millions of residents in county areas face sweeping council service cuts as government funding covers just 2p in every £1 of new costs

England’s largest councils will receive just 2p in government funding for every £1 of their rising costs over the next three years as government diverts money to urban areas— and could force them to cut dozens of everyday services, from libraries to social care, as they grapple with an £11bn funding gap.

New analysis by the County Councils Network (CCN) shows that county and large rural unitary councils will be spending £7bn more a year on services by 2028/29, the highest cost pressures of any part of England. Yet under the government’s Fair Funding Review and provisional finance settlement, published last month, new government grants for county and unitary councils will total just £133m over the next three years—around 2% of their increased costs.

With millions being redirected away from county areas under the reforms, council leaders accuse the government of ‘cherry picking’ which areas to prioritise ahead of a final vote next month on the Local Government Finance Settlement which will confirm how much councils will receive from government. The CCN warned in the summer that the government’s proposals would significantly impact on rural areas but ministers have since changed the reforms even further to redirect more money to urban areas.

As a result of those government proposals and rapidly rising costs, the changes mean that government funding will cover just 2p for every £1 of additional costs for the 39 county and unitary councils in England, compared to 42p for every £1 in costs for urban metropolitan borough councils.

Consequently, county and unitary councils say they will have little option other than to keep raising council tax for the foreseeable future, with their income now largely reliant on local taxation. But even accounting for this county areas still face an £11bn cumulative funding gap over the next three years – around half of the total shortfall facing all councils in England.

A new survey from CCN of county and rural unitary councils paints a stark picture of the impact on local services over the next three years because of the government’s finance reforms:

• Whilst some county areas will see a rise in government grant in the Fair Funding Review, the majority will be overwhelming reliant on council tax rises for any increases in income. Over three quarters of councils say the impact that the reforms will have on their finances will be negative, with half answering ‘very negative’. Just one in ten say they are positive.
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• Everyday “bread-and-butter” services are most at risk, impacting on people’s lives. Eight inten county and unitary councils are now more likely to reduce spending on bin collection, recycling, and tips and six in ten now plan to cut bus subsidies and public transport. Half are now more likely to reduce road repairs and eight in ten councils say staff redundancies are now more likely.
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• Community amenities are also in the firing line. Seven in ten councils are more likely to cut spending on libraries or reduce opening hours, with similar numbers planning reductions to museums and galleries. Seven in ten county unitary councils say spend on leisure centres is more likely be cut, with many (three quarters) warning residents that charges for leisure services and parking in their areas will rise.
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• Care services, which make up the largest share of council spending, are also under pressure. Seven in ten councils are now more likely to reduce spending on adult social care services, such as day centres, while six in ten say children’s centres and youth services could face cuts.
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• For county unitary councils, welfare support may also be reduced. Six in ten unitary councils say they are more likely to tighten eligibility for council tax support, while the same number of authorities are now poised to cut welfare advice and support services.

Even with these reductions, many councils warn they may still be unable to balance their budgets. Close to one in four county and unitary councils say they may need to apply for Exceptional Financial Support to balance their upcoming 2026/27 budgets this year, with confidence deteriorating further in later years. By the end of this Parliament, just three in ten councils are confident they will not have to apply for this support.

Last-minute changes to the Fair Funding Review reforms included downscaling a ‘remoteness’ factor within the new formula – which accounted for the higher costs of delivering services in large rural areas. The government had previously included this adjustment for all services, but now only apply this to adult social care. The government also maintained a £600m ‘Recovery Grant’ for the next three years, which overwhelmingly benefits urban councils. Together, these changes are estimated to have redistributed a further £500m from counties.

The CCN is calling on the government to provide significant further additional funding at the final Local Government Finance Settlement to enable its councils to avoid some of the most drastic cuts to services.

The network says that recent unfair changes go against the principles of the review and are not based on evidence. It is calling on the government to reinstate ‘remoteness’ into the formula for funding local authorities, which accounted for higher costs of delivering services in rural and remote areas, as well as reducing the Recovery Grant.

Cllr Steven Broadbent, Finance Spokesperson for the County Councils Network, said:

“The funding outlook for county and unitary councils looks increasingly bleak over the next three years, with the government cherry picking the areas to focus funding on and diverting much-needed resource towards urban areas. Instead, the burden is being placed firmly on county and unitary councils and local taxpayers, meaning residents face yearly council tax rises for the foreseeable future.

“Faced with a multi-billion shortfall over the next three years because of these reforms, many county leaders question how ‘fair’ the Fair Funding Review really is. Whilst councils will continue to protect many essential services and those we are legally required to deliver, the reality is that many are now more likely to cut everyday services that millions rely on, including buses, libraries, and social care.

“As MPs prepare to vote on the Local Government Finance Settlement, it is important that both the long-term sustainability and the ongoing existence of many highly valued services in county areas are fully considered. The government must make more funding available for local authorities and reinstate measures in the reforms that properly reflect the costs of delivering public services in rural areas.”

Notes

• The CCN survey was completed by its member councils during December and January. The survey received 34 responses, which is an 87% response rate.