Local Government Finance Settlement: Services Grant Information

In the provisional local government finance settlement (LGFS) for 2024/25 published on 18 December Services Grant (SG) has been cut from £483.3 million in 2023/24 to £76.9 million for 2024/25. This is an 84.1 per cent reduction.

Department for Levelling Up, Housing and Communities (DLUHC) officials have told us that the funding removed from SG has been recirculated in the LGFS. They have not provided a breakdown of where the cash has gone but the documentation accompanying the LGF indicates that it has been used in the Funding Guarantee and in the equalisation of the adult social care council tax precept. The Government also intends to hold a small proportion of SG back as contingency to cover any unexpected costs that may arise between provisional and final settlement. This is the same approach as previous years, where contingency has been used to cover, for example, adjustments to New Homes Bonus allocations following updated data.

DLUHC officers have assured us that all the removed SG funding has stayed in the Settlement, and the (unknown) amount held back as contingency will be added back to the quantum in the Final Settlement. They are not able to say which funding line that funding will go back into – though it is possible that if the contingency is not wholly used on other grants, it could go back into Services Grant. All things being equal, this means that the total Core Spending Power quantum in the Final Settlement will be very slightly higher than in the Provisional Settlement as the contingency is added back.

Our analysis shows that SG funding was removed from councils through an across the board, even cut. With one exception all councils of all types received an 84.3 per cent cut in SG in 2024/25. The Isle of Wight received a lower reduction 46.8 per cent reduction. LGFS documents state that this is “in recognition of the unique circumstances facing the Isle of Wight and its physical separation from the mainland”.

We do not know the methodology used to reallocate the funding removed from SG to the other funding lines in the LGFS. We are engaging with DLUHC to see if this can be provided to us and we will provide an update if and when we have a clear answer on the reallocation process at the council level.