Councils need increase in overall funding to stem emerging risk of “system-wide financial failure”: LGA

The Prime Minister, Andy Burnham, has set out ambitions for fiscal devolution and widespread devolution to local areas with new powers over skills, transport, employment support, housing, innovation and public services.

A white paper is expected following the Autumn Budget detailing the reforms in full.  

In its Autumn Budget submission, the LGA has said councils support the government’s commitment to deliver meaningful devolution across England.

However, it warned that councils also need access to the powers and funding to deliver “vital services and prosperity” for residents, including any areas currently without mayors or strategic authorities. 

It said: “The full value of local government will only be realised if both strategic and local authorities are empowered and financially sustainable.”

The LGA warned that despite already delivering billions in “savings and efficiencies” since 2010/11, councils still face a £7 billion funding gap by 2028/29, and one in five councils with social care responsibilities required Exceptional Financial Support from Government to set a balanced budget for 2026/27.  

In light of this, the LGA has called on the Government to:

• “Deliver meaningful fiscal devolution by ensuring that the fiscal roadmap, to be published with the Autumn Budget, and the subsequent white paper include both revenue retention and raising opportunities for councils. 
• Introduce a revised approach to Exceptional Financial Support - a broader response that addresses the underlying cost and demand pressures facing the sector is needed. 
• Deliver on its previous commitments to look at ways to reduce burdens on local authorities by reviewing sales, fees, charges and statutory duties. 
• Commit to writing-off historic and accruing Dedicated Schools Grant deficits fully and reconsider the decision to net surpluses from non-high needs blocks off the deficit. 
• Ensure that growing financial pressures on NHS budgets are not transferred to council budgets. 
• Fully fund the costs to councils of the government’s reform programme for the adult social care workforce, including the introduction of a Fair Pay Agreement. 
• Set out a clear timetable for local government reorganisation and take steps to ensure councils are not left to pick up the bill following the recently announced review.”

Cllr Eamonn O’Brien, Chair of the LGA, said: “The Prime Minister is right to identify that the imbalance between national and local government is holding back growth. But you cannot devolve power if the foundations are financially fragile.

“If the Government wants national, regional and local growth, it needs to fix the local foundations first. Strong, capable and financially sustainable local authorities are essential to deliver on our shared priorities for health, housing and giving people every opportunity to thrive where they live.

“Genuine devolution needs to reach every part of the country and every level of local government. Our Autumn Budget submission sets out how, with sustainable funding and meaningful powers, local government can deliver the homes, skills, public services and opportunities for our communities."

Lottie Winson