2nd Report - The Funding and Sustainability of Local Government Finance
Select Committee
Housing, Communities and Local Government Committee
HC 514
23 July 2025
Government response
5th Special Report - The Funding and Sustainability of Local Government Finance: Government Response · published 21 Oct 2025
Recommendations & Conclusions
6 results
1
Conclusion
Acknowledged
Major local government reorganisation lacks clear vision, risking embedding existing systemic flaws.
Conclusion
The Government is undergoing the most significant local government reorganisation in decades. Substantial change, if not driven by a clear vision of what local government should be for and should be achieving, risks embedding undesirable elements of the current system …
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Government Response Summary
The government acknowledged the importance of strong local government, referencing a statement by the former Deputy Prime Minister on building a modern state, and committed to continuing engagement with councils on necessary reforms, including funding.
Ministry of Housing, Communities and Local Government
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10
Conclusion
Acknowledged
Temporary central government funding is required to rebuild damaged preventative services.
Conclusion
Rebuilding and strengthening damaged preventative services will require temporary increases in central government funding before the demand for acute services starts to drop. (Conclusion, Paragraph 49)
Government Response Summary
The government is reviewing and updating the New Burdens Doctrine to ensure its effectiveness, including considering how to better account for bidding costs and streamline the payment process for councils.
Ministry of Housing, Communities and Local Government
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33
Conclusion
Acknowledged
Record levels of homelessness among families and children strain local authority finances
Conclusion
It is a source of national shame that cases of homelessness, particularly among families and children, are at record levels and continue to rise. This is placing considerable strain on the finances of local authorities. We repeat the findings of …
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Government Response Summary
The government acknowledges the concern about rising homelessness and outlines specific actions, including allocating £1 billion for the Household Support Fund and Discretionary Housing Payments and £950 million for the Local Authority Housing Fund to increase temporary accommodation supply.
Ministry of Housing, Communities and Local Government
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35
Conclusion
Acknowledged
Multi-year funding settlements insufficient to solve underlying local government financial problems
Conclusion
We support the return to multi-year funding settlements, but the local government funding reforms announced to date will not solve the underlying problems in the system by themselves. (Conclusion, Paragraph 127)
Government Response Summary
The government acknowledges the need for local government funding reform, confirming its commitment to multi-year allocations through the 2026-27 LGFS and simplifying the funding landscape via the Fair Funding Review 2.0.
Ministry of Housing, Communities and Local Government
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44
Conclusion
Acknowledged
Business rates system remains a concern, harming growth and entrenching deprivation.
Conclusion
We acknowledge the Government’s current plans to reform business rates and the Business Rates Retention system, including the business rates reset and the addition of new multipliers. However, we remain concerned that the business rates system can harm growth, disincentivise …
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Government Response Summary
The government reiterates its commitment to transforming the business rates system to create a fairer system that supports investment, and acknowledges the importance of business rates in local government funding.
Ministry of Housing, Communities and Local Government
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51
Conclusion
Acknowledged
Exceptional Financial Support via capitalisation directions weakens long-term council finances and investment.
Conclusion
Exceptional Financial Support (EFS) by means of capitalisation direction is a stopgap measure that avoids section 114 notices and allows councils to produce short-term balanced budgets, but can weaken councils’ finances and capital investment in the long term. Capitalisation directions …
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Government Response Summary
The government states it is committed to fair funding distribution and has consulted on transitional arrangements and financial flexibilities for local authorities, with further details on an updated support framework to be set out in the autumn.
Ministry of Housing, Communities and Local Government
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