Spending Review 2025 submission: Annexes

The below annexes accompany our submission letter to the Chancellor for the Spending Review 2025. 

In Annex 1, we present our evidence base and asks. We set out the actions we believe are necessary for the Government, and lay out the contribution councils can make to public service reform and technology-led reform specifically. The remaining sections set out the roles councils can play in delivering on Government’s five missions, and the support they require to maximise their contribution.

Annex 2 provides a summary list of all of our asks.

To unlock the full potential of councils both to support local communities and help deliver the Government’s Plan for Change, the sector needs sufficient and sustainable funding. Over the long-term there also needs to be a review of, and reform to, the overall revenue funding system for councils.

Cost pressures

A fundamental challenge facing the sector is that cost and demand pressures are rising faster than funding. While inflation has fallen since its peak in 2022/23, the sector is still grappling with the huge resulting uplift in its cost base. Councils also continue to face wage pressures driven by increases in the National Living Wage (NLW). Recent changes to employer national insurance contributions (NICs) rates and thresholds will add an estimated £637 million in direct costs to councils’ wage bills and up to £1.1 billion in indirect costs passed on from providers of outsourced or contracted out services. Government has only provided local authorities with £515 million in compensation for the costs associated with the NICs changes.

In addition to these economy-wide inflationary and wage pressures, there are individual service areas with cost and demand dynamics that are exerting higher cost pressures:

• Rising costs in children’s social care – councils face growing complexity of need and increases in placement costs. LGA research has shown that in 2022/23 councils paid for over 1,500 placements costing £10,000 or more per week – more than 10 times greater than the 120 placements purchased by councils at this price in 2018/19.
• Escalating costs of home-to-school transport for children with special educational needs and disabilities (SEND). The number of children and young people with an Education, Care and Health Plan increased by 62.7 per cent from 2018/19 to 2023/24. This led to a real-terms increase in budgeted spend by councils on home-to-school transport for children with SEND of £544 million (64.3 per cent) over the same period. Overall, councils budgeted £1.4 billion in 2023/24 for SEND home-to-school transport.
• Increasing costs and demand in adult social care means budgeted net spend on adult social care increased by £3.7 billion (18.1 per cent) in real terms from 2019/20 to 2024/25. The ADASS 2024 Autumn Survey shows that 81 per cent of councils are on course to overspend their adult social care budget in the current financial year, up from 72 per cent in 2023/24. 
• Increasing costs of homelessness services with multiple contributory cost and demand drivers, including asylum and resettlement issues and an insufficient supply of affordable housing. Councils’ budgeted net spend on homelessness services has increased by £604 million (77.4 per cent) in real terms from 2019/20 to 2024/25.

Our analysis demonstrates that if current cost and demand trends continue, by the end of 2028/29, cost and demand pressures will have added £21.4 billion to the cost of delivering council services since 2024/25. This is 29.8 per cent in additional service costs.

The Spending Review’s commitment to delivering public service reform to manage cost and demand pressures and deliver greater value for money, particularly in areas such as children’s social care and services for children with SEND, will be crucial in reducing these cost pressures. The sector is keen to work with Government on service reform, and much of the rest of our submission focuses on this issue. But reform alone will not address the scale of the cost and demand pressures faced by the sector and there is a genuine need for a larger funding quantum.

Funding gaps

In our 2024 Autumn Budget submission, we compared overall cost pressures with modelled change in core revenue funding for councils. We estimated that councils had a £2.3 billion funding gap in 2025/26 rising to £3.9 billion in 2026/27. A £6.2 billion shortfall across the two years.

Since these figures were produced, the costs facing the sector have increased, principally as a result of the changes to employer NICs. But Government has also made new funding available:

• An additional £4.4 billion is available in Core Spending Power (CSP) in 2025/26 including £502 million to address the costs of the NICs changes. A further £13 million in NICs compensation is available outside CSP for Mayoral Combined Authorities.
• £1.1 billion via the Packaging Extended Producer Responsibility scheme (pEPR). 

Taking these new pressures and funding streams into account, we now estimate that councils face a £1.9 billion gap in 2025/26, rising to £4.0 billion in 2026/27, £6.0 billion in 2027/28, and £8.4 billion in 2028/29. Councils face a combined funding shortfall of £20.3 billion across the four years of Phases 1 and 2 of the Spending Review period.

A key issue behind the continuation of a substantial funding gap despite the provision of additional Government funding is that councils have faced new costs as a result of the NICs changes. These have not been fully compensated for by Government.

Furthermore, based on a recent LGA survey, we estimate that a substantial share of the 2025/26 pEPR payment to the sector will be used to improve waste services rather than to offset wider service pressures. The future of this funding stream is also uncertain. It is not clear whether there will be an adjustment to the existing funding formula to account for the fact that councils are already paid for services that are now funded through pEPR. For this reason, we have not included the pEPR funding in our modelling beyond 2025/26. 

The pEPR funding will make an important contribution to helping councils balance their budgets in 2025/26. If an adjustment is made in 2026/27, this will effectively represent a funding reduction for the sector. If Government chooses to adjust existing waste funding in recognition of the new pEPR funding in 2026/27, it is vital that this adjusted funding is retained within the local government finance settlement to address financial pressures in other service areas.

Financial sustainability

Councils’ ability to cope with current cost and demand pressures is hampered by the years of funding reductions in the 2010s. Councils’ core revenue funding has begun to rise in recent years, but we estimate that Core Spending Power is still 16.4 per cent lower in real terms in 2025/26 compared to 2010/11 (excluding the NICs compensation funding announced in February 2025).

But the savings councils have had to make since 2010/11 are not solely due to funding reductions. Councils have also had to deal with growing demand and more complex patterns of need. We estimate that if council net service spending in 2010/11 had grown in line with inflation, wage growth and demographic and demand drivers it would have been £82.8 billion by 2022/23 – 42 per cent higher than actual service spend in that year. This means that councils have made £24.5 billion worth of cuts or efficiencies to their net service spending from 2010/11 to 2022/23. 

This combination of past and ongoing pressures means that financial resilience in the sector is low. The LGA surveyed council chief finance officers (CFOs) in January 2025 on their 2025/26 budget setting in the light of the various announcements in the 2024 Autumn Budget and the 2025/26 Provisional Local Government Finance Settlement. Even after the announcements of new funding and reform, 25 per cent of CFOs said that they had either applied for Exceptional Financial Support (EFS) from MHCLG to support their 2025/26 budget or they expected to do so in 2025/26 or 2026/27.

Given the risk of systemic financial failure facing the sector there is a clear need for additional financial support. However, it is worth considering whether the current scheme is effective. While the Government has revised the terms on which councils will be able to borrow from the PWLB in the context of EFS, in our view there is still a risk that EFS as currently designed could potentially load struggling councils with further debt and/or undermine future capital programmes by burning through councils’ capital receipts. In this context the Government should assure itself that the current Exceptional Financial Support programme is achieving its objective of supporting councils in returning to financial sustainability in an efficient and effective manner.

Risks to service sustainability

Despite councils’ best efforts to continue providing the services needed by their residents it is inevitable that the pressure of funding reductions and cost and demand pressures over a prolonged period has impacted the scale and quality of local services. Key issues include:

• Council spend is increasingly concentrated on fewer services and on fewer people: As resources have diminished, councils have protected services such as social care (adult and children’s) where there are clearly defined statutory responsibilities. This means councils are less able to support local and national agendas on key issues such as housing, economic growth, the cost-of-living crisis, and climate change. 
• Growing concerns over the quality and scale of service provision: Due to financial pressures councils are struggling to provide the services their residents need:
  • LGA annual resident satisfaction surveys show that the share of respondents that are satisfied with council service provision has fallen for every service area in the survey between 2016/17 and 2023/24. Satisfaction levels for each service have all fallen by between 3 and 16 percentage points since 2016/17. 
  • In children’s social care, there is evidence that due to market pressures some councils have no choice but to continue using unregulated placements for under 16-year-olds in care. Ofsted recently stated that, “the national shortage of placements for children with complex needs means some particularly vulnerable children live in these settings for long periods”.
  • In adult social care, as of 31 March 2024, 418,029 people were waiting for an assessment, the commencement of their care package or direct payment, or a review of their care plan.
• Reduced spend on preventative services: The growing share of council spending focussed on statutory obligations has also led to a greater focus on reactive, demand-led spending, such as on temporary accommodation, and a reduction in spend on preventative services.

An outdated and inefficient funding system

The financial challenges faced by councils have been exacerbated by a local government funding system which has not been subject to significant reform since the introduction of 50 per cent business rates retention in 2013/14. Councils operate in a dated, patched-up system where financial planning is hindered by a drip feed of one-year finance settlements and financial sustainability is increasingly secured by one-off grants or EFS.

In this context the Government’s commitment to “fix the financial foundations” of the sector is welcome. Initial announcements on the introduction of multi-year settlements and reform to the allocation framework are positive and have been long called for by the LGA. It is vital that: Government sees these commitments through in a sufficiently timely fashion to allow councils to plan; the development process is transparent with sufficient opportunity for all views to be considered; and adequate transition arrangements are put in place.

However, while recent proposals are a first step in stabilising the sector’s finances, they do not set out a route map to a sustainable financial model for the sector. There are two major omissions:

• First, while greater certainty and a more up to date system are welcome, these proposals still rely on the basic components of council funding now in place, including an ever-growing reliance on council tax. For instance, while core spending power is increasing by £4.4 billion in 2025/26 half of this (£2.2 billion) is from council tax, and relies on councils increasing their rates to the maximum before a referendum is required. Councils will be reluctant to pass these costs on to their residents, but they have very little option as not doing so will widen their funding gap and place more services at risk. Furthermore, council tax is not the solution as it raises different amounts of money in different parts of the country, unrelated to need. Overall, the continuation of a funding system which leaves councils with no option other than to raise council tax annually is not the answer to the sector’s current financial challenges.
• Second, it is not clear how the Government’s current proposals will address the need for an increase in the quantum of funding available to the sector. While the Government’s commitment to use the Spending Review to drive public service reform offers the opportunity to reduce demand and cost pressures there is still a need for additional resources. This is a particular issue in adult social care where the recently announced review will not report for another three years. In this context there needs to be some discussion on identifying new or devolved funding streams to increase the quantum of funding available to the sector.

Key actions for the Government

In order to provide the financial sustainability the sector needs to help deliver the Government’s missions, Government should:

The Government should also look to build on its recent announcement on reforming the funding system and begin to set out a route map leading to more substantive, long-term reform of the funding system. To do this:

Recruitment and retention challenges

A key challenge facing councils in maintaining financial and service sustainability are the growing difficulties in relation to workforce recruitment and retention. LGA research has demonstrated that more than nine in 10 councils are experiencing staff recruitment and retention difficulties. Further evidence demonstrates the particularly acute situation in legal services, finance, adult social care, IT, building control and environmental health.

There are multiple factors underlying the sector’s workforce issues, but Government policy on the NLW adds further challenges. Policy changes to the NLW, the creation of Fair Pay Agreements in adult social care and the reinstatement of the School Support Staff Negotiating Body require funding from the Government to be effective and deliver on its ambitions. In order to improve pay, terms and conditions for public sector workers, as stated in the Government’s mission objectives, Government must provide the necessary funding for councils to be able to meet costs. This includes both direct costs to councils’ pay bills and indirect costs passed on by external providers.

The broad local government workforce includes two million employees working in councils, schools and fire authorities, with as many again working for contracted out and commissioned employers providing some of the most critical public services. Ensuring the Make Work Pay agenda succeeds in local government is key to it succeeding for the UK.

Implementing the reforms proposed in the Employment Rights Bill will incur costs for employers. The Government needs to work with the LGA as the legislation proceeds through the Parliamentary process to ensure it is workable for the sector and that there is sufficient funding to implement the reforms.

We welcome the creation of Skills England and many of the Government’s proposed reforms. However, restrictions on councils’ spending of their levy on Level 7 apprenticeships coupled with the absence of the Level 2 Business Administration apprenticeship (an important entry route into the local government workforce), risks trapping councils in an impossible position. Government should allow councils to retain access to levy-funded Level 7 apprenticeships and unutilised apprenticeship levy. This will allow resources to be redirected into improving local government workforce skills and capacity, and target young people and care leavers.

Engaging with these proposals offers the potential to support councils deliver key services for local residents and also to support the Government’s missions. For instance, as major local employers, councils are key players in the local markets that underpin local economies and drive their growth. Ensuring the implementation of Make Work Pay is workable for local government will strengthen councils’ contribution as local employers and feed directly into the Growth Mission.

Likewise, in their role as employers, councils have the ability to support the Government’s mission to break down barriers to opportunity. For instance, giving councils greater flexibility over the apprenticeship levy will allow them to target young people currently experiencing barriers to opportunity.

Prevention means intervening at the earliest practical opportunity to improve outcomes. It entails taking a long-term, broad-based approach to spending decisions to ensure that short-term savings do not impair more enduring social and economic outcomes.

Research consistently highlights the sustainable improvements to health, wellbeing and prosperity that can be achieved through a preventative approach to Government spending decisions, and the design and delivery of local services. Yet we have seen a significant reduction in early intervention funding, and a shift in the profile of council spending as they battle to meet growing demand pressures in acute and frontline services with limited resources.

There has also been a growing recognition of the importance of applying a prevention lens to a wider range of public services, to the extent that a number of researchers including DEMOS and the Institute for Government have called for prevention to be considered as a key component within all government spending decisions.

The LGA would like to work with the Government to develop a more preventative approach across all public services. We set out a range of preventative approaches within key policy areas throughout this submission including housing, education, employment and adult social care and children’s services. In all of these areas, connections between services are vital and strengthening joint working is key to success. In addition, we have identified the following key measures that will contribute to strong foundations and support reform and integration across public services.

Evidence, innovation and evaluation

To help councils embed prevention as an underpinning approach, and to build the evidence base on the effectiveness and contribution of different forms of preventative spending, the Government should work with councils to:

The welfare and benefit systems

In addition to promoting preventative approaches within council services, we would also call on Government to:

Public health and the wider determinants of health and wellbeing

Local authority public health interventions funded by the public health grant provide excellent value for money, with each additional year of good health achieved in the population by public health interventions costing £3,800. This is three to four times lower than the cost resulting from NHS interventions of £13,500. Analysis by the University of York suggests that the expenditure through the ring-fenced public health grant is three to four times as cost-effective in improving health outcomes than if the same money had been spent in the NHS baseline.

For councils and their partners to improve the health of the nation, we need the Government to:

Preventative places – culture, leisure and the public realm

English councils are the largest public funders of culture, sport and leisure, spending £2.6 billion a year. They run a nationwide network of local cultural and leisure organisations and assets, providing the core infrastructure that directly delivers preventative interventions. Physical activity alone saves the NHS £9.5 billion and social care £1.7 billion each year and generates £85 billion in economic value annually. Museums and libraries offer excellent educational opportunities to those who lack resources, helping to boost early life chances.

The following steps are necessary to ensure that councils’ culture and leisure services are able to deliver these benefits:

Local government improvement 

A new focus on prevention is a vital part of public service reform. This extends to support to local government to improve and address the challenges which face the sector. Increased and sustained support to councils to address those challenges at an earlier stage will lead in turn to fewer councils requiring more intensive and costly statutory intervention.

Sector-led support to current and emerging local and strategic authorities to complete reorganisations and prepare to receive new powers will again save money in the longer-term.

However, Government will need to give consideration to the extra costs of delivering enhanced preventative support.

Investing in enhanced support to the local government sector will increase its effectiveness in delivering sector-wide priorities. This includes, embedding good practice in local authority housing delivery and management, and use of behavioural insights to improve local health outcomes, reduce health inequalities and increase local rates of employment.

In addition to ensuring the competitiveness of local government pay, effective marketing and communications are required to build understanding of the value and non-tangible rewards of a career in public service. 

Enabling a digital revolution in local government

While local government is eager to support the Government's vision for digital transformation, a significant digital divide persists across the country. To truly unlock the potential of a digitally-enabled public sector, a coordinated national effort is needed to empower all councils on their digital journey. The Local Government Association is calling for a Local Government Centre for Digital Technology (LGCDT), and seeking just under £15 million over three years, to accelerate digital transformation and public sector reform across local government.

Despite individual successes in digitising services, many councils still grapple with outdated systems, a lack of digital expertise, and the growing threat of cybercrime. Furthermore, digital leadership is often siloed within technology departments, hindering cross-council collaboration and the scaling of successful initiatives. This fragmentation results in duplicated efforts, wasted resources, and inconsistent service quality.

The LGCDT will address these challenges by driving digital transformation and innovation across the sector, ensuring that all councils and residents benefit, regardless of their location or current digital maturity. It will act as a national catalyst, supporting regional innovation and fostering collaboration between neighbouring councils. This place-based focus will address unique local challenges and ensure that opportunities for digital innovation reach every corner of the UK.

The LGCDT's mission will be to accelerate technology-enabled transformation in local government, building on existing successes, scaling innovative solutions, and creating a more resilient and efficient sector. It will empower councils to embrace digital transformation confidently, foster a culture of innovation, and raise the bar for service delivery. By facilitating knowledge sharing and collaboration, the LGCDT will ensure the rapid adoption of successful digital initiatives, eliminating wasteful duplication and accelerating progress. It will also engage with the technology sector to ensure solutions are tailored to the specific needs of local government, promoting competition and driving value for money in procurement.

The benefits of the LGCDT are numerous. It will drive efficiency by promoting shared services and best practices, helping councils streamline operations and reduce costs. Its expert guidance will help councils navigate the complexities of digital transformation and mitigate risks associated with new technologies and cyber threats. Through user-centred design and data-driven decision-making, the LGCDT will enable councils to deliver better, more consistent services for residents. It will also enhance value for money by facilitating collaborative procurement and market engagement, helping councils secure the best technology solutions at the best price. Finally, the LGCDT will invest in training and development programmes, equipping council staff with the skills and knowledge needed to thrive in a digital environment.

The LGCDT could also play a significant role in the creation and support of a network of technology and innovation offices across the country, housed in existing organisations like combined authorities and universities. This would ensure that alongside fixing the fundamentals, councils have the opportunity to engage in digital innovation and the adoption of best practices, across every corner of the UK. This place-based focus will address the unique challenges and opportunities faced by different localities and foster collaboration between neighbouring councils. By establishing these regional offices (at an annual cost of c£2 million each) to work alongside the LGCDT, the Government can cultivate a truly interconnected network of digital innovation, accelerating the spread of successful initiatives and ensuring no council or community is left behind. The LGCDT also aligns with the Government's "Blueprint for Digital Government" and its Growth Mission, reducing regional disparities in digital service provision and fostering innovation.

The LGA is uniquely positioned to deliver the LGCDT and drive immediate progress due to its national reach, local understanding, commitment to transformation, and existing resources. Its near-universal membership fosters sector-wide collaboration and a unified and coherent approach to digital transformation. The LGA's established governance structures and experience in managing large-scale projects reduce risk and encourage trust. Its strong accountability mechanisms ensure transparent and responsible governance, while its existing capabilities and programme allow for seamless integration and avoid duplication of effort.

Connecting communities

Government has set ambitious targets for broadband and mobile coverage through initiatives like Project Gigabit. Realising these goals requires a concerted effort to empower local authorities, who possess invaluable local knowledge and insights to address specific local connectivity challenges. Current connectivity strategies often falter due to a disconnect between national objectives and local realities. This misalignment can lead to misplaced priorities, implementation delays, and ultimately, a failure to meet the diverse needs of communities nationwide.

Beyond connectivity, it is crucial to address the critical issue of digital inclusion. While providing access to broadband and mobile networks is essential, it is not enough. Efforts must also be made to overcome affordability barriers, tackle digital skills gaps, and ensure online services are accessible to all, regardless of age, disability, or digital literacy. The Government, through the Department for Science, Innovation and Technology (DSIT), must invest in local capacity and collaboration. By strategically allocating resources (even an investment of less than £20 million over three years could have a significant impact), the Government can bridge the digital divide, stimulate local economies, and ensure equitable access to essential digital infrastructure.

DSIT should work with the LGA to address challenges to digital inclusion and connectivity, and empower communities digitally. There should be three phases to this strategy:

Council support for children and young people is central to the delivery of the Government’s mission to break down barriers to opportunity. The prevalence of mental health problems has risen significantly, and many more children are diagnosed with SEND but are unable to access the support they need. For children in care, there is a lack of high-quality placements alongside escalating costs for those with the greatest needs. These issues must be addressed to ensure children and young people receive the support they need, and that councils can make their full contribution to the Government’s mission.

Special educational needs and disabilities (SEND)

Dedicated Schools Grant – high needs block deficits

Dedicated Schools Grant (DSG) and high needs funding pressures are one of the biggest challenges that councils with education responsibilities currently face. This is the result of an ever-increasing demand for SEND support and the growing number of children and young people who have an Education, Health and Care Plan (EHCP). DfE statistics show that at January 2024 there were almost 576,000 children with an EHCP, an increase of 11.4 per cent on 2023.

Independent research commissioned by the LGA and County Councils Network (CCN) has found that, despite bespoke financial support for some councils via the DfE’s Safety Valve programme, many councils are running a ‘deficit’ on their DSG High Needs budget. The research shows cumulative deficits currently stand at £3.2 billion and are projected to rise to £5 billion by 2026. The National Audit Office’s (NAO’s) recent report, ‘Support for children and young people with special educational needs’, notes that the Department for Education (DfE) estimates that 43 per cent of councils will have deficits exceeding or close to their reserves by March 2026.

These deficits are currently held off councils’ balance sheets due to a temporary statutory override on the treatment of DSG deficits. Councils face a financial cliff edge when this ends in March 2026. A January 2025 LGA survey found that if the override is not extended or replaced 53 per cent of surveyed councils would not be able to set a balanced budget for 2026/27.

We do not believe that the proposals set out in the Government’s SEND and Alternative Provision improvement plan will result in the growth in EHCPs either slowing down or stopping. Nor do we believe that the ‘Safety Valve’ programme, the Delivering Better Value in SEND, or the additional £1 billion in high needs funding in the 2024 Autumn Budget will result in council high needs deficits being eliminated in the absence of reform prior to March 2026. We are calling on Government to write off all high needs deficits so that councils are not faced with having to cut other services to balance budgets through no fault of their own or their residents.

To meet the long-term aims of the ‘Breaking down the barriers to opportunity’ mission, long-term reform of the SEND system is both unavoidable and needed urgently. The LGA/CCN-commissioned research includes eight recommendations that form a blueprint for reform (further detailed implementation planning would be required if they were taken forward). We urge Government to take these recommendations forward.

DSG high needs deficits – cashflow pressures

In addition to the risk to councils’ finances posed by the end of the statutory override, the LGA and CCN also identified immediate costs on councils with high needs deficits. Councils finance their deficits with cash, which cannot then be used to earn interest. Also, if a council runs out of cash, then it will have to borrow to ensure it has sufficient cashflow to manage its day-to-day functions.

If the £3.2 billion in cash councils have used on their deficits had instead been placed in a bank or deposit facility earning 4 per cent annually the sector would have generated £128 million. On the same basis, the forecast deficit of £5.0 billion in 2025/26 means councils will lose £200 million in unearned income. And these estimates do not factor in instances where councils have had to supplement their cashflow by borrowing, which will be a significantly higher rate of interest. While resolving the issue of high needs deficits overall is the priority, Government must give some consideration to the costs to councils of running the deficits in the meantime.

Home-to-school transport

Costs of home-to-school transport are escalating for children with SEND, driven by ongoing growth in the number of children with EHCPs. Budgeted net spend in 2023/24 is £1.4 billion, a 95 per cent cash terms increase since 2016/17.

Given the financial pressures created by growing demand for home-to-school transport the Government needs to provide additional funding for councils, or to work with councils to identify ways to manage demand for, and access to, this service. These immediate measures should be accompanied by longer-term reform of home-to-school transport.

Actions needed to support councils

To support councils to address barriers to opportunity, the Government should:

Children’s social care

Cost pressures

Rising costs in children’s social care have seen budgets go up by 11 per cent to £14.2 billion in 2024/25 compared to 2023/24. As set out in our Phase 1 submission this has been driven by the rising costs of placements for children in care, largely due to increasing use of residential placements and provision for unaccompanied asylum-seeking children, and the increasing need for specialist support for children with complex needs.  

As costs have increased, councils have focused spend on meeting their statutory obligations. This has led to a reduction in spend on preventative services and a greater focus on reactive, demand-led provision, despite evidence highlighting the financial and societal benefits of earlier support. Government has signalled its intention to address these issues with measures in the Children’s Wellbeing and Schools Bill, and the creation of the Children’s Social Care Prevention Fund. It has also combined several individual funding streams into the Children and Families Grant.

New funding and the increased Social Care Grant are very helpful. However, neither is currently sufficient to meet the scale of the challenge. In May 2022, the Independent Review of Children’s Social Care put the cost of whole system reform at £2.6 billion in new spending. Moving forward, it is vital that existing and new duties, with a focus on a shift towards prevention, are fully funded.

Many of the issues that lead to children needing support from children’s social care are within the domain of other Government departments and public sector bodies. The Barriers to Opportunity Mission provides a chance to bring all partners around the table to work towards shared ambitions for children and families. We would like to see this formalised in a cross-government strategy.

Early education

Early education is a vital element of the Government’s Barriers to Opportunities Mission and its ambition to boost the number of children reaching the early development goals by 2030. Councils contribute to this mission via their duty to ensure families can access early years entitlements and their work with providers to expand funded early years education and childcare.

Recent funding increases are welcome, particularly in the funding rates for children aged 2 and under. However, there are ongoing challenges in the rates paid to providers with significantly lower amounts for the three and four year old funding rates which has not kept pace with the cost of provision. It is now 8 per cent lower in real terms in 2024/25 than in 2016/17. Furthermore, the rise in employer NICs and the NLW announced in the Autumn Budget 2024 will leave childcare providers with further financial pressures.

There is particular risk that without proper funding to recruit and retain staff, the quality of education and accessibility of provision for children with SEND may suffer. In the LGA’s survey of councils on early years education and childcare expansion in 2024, 93 per cent of respondents said they were concerned about ensuring sufficiency of provision for children with SEND.

Actions needed to support councils

To support councils to address barriers to opportunity, the Government should:

Context

Adult social care is fundamentally about people’s rights and relationships. It helps ensure that everyone can pursue the things that matter most to them, irrespective of their age or conditions. But it is also a key enabler of delivering on the Government’s mission to build an NHS that is fit for the future. Whether it is councils’ innovative work on hospital discharge to free up acute capacity, the vital work councils do to support people to remain fit and well and away from hospitals, or the work they do with partners to recruit, retain and develop the care workforce, local government is central to realising a sustainable NHS and the Government’s health mission. Local government also plays a key role in keeping people in work, including through employment and skills support to address economic inactivity and enable carers to work.

With the announcement of a new independent Commission on adult social care, chaired by Baroness Louise Casey, we potentially have a structure for tackling medium- and long-term challenges and building a care and support system we can be proud of. However, the Commission is operating to a very generous timescale with, as we understand it, less focus on the short-term. This does little to allay concerns about the serious pressures facing the sector now, and their consequences for people drawing on or working in adult social care, and our communities.

Pressures

The ADASS 2024 Spring Survey showed that adult services directors are planning to deliver £903 million in savings for 2024/25, taking cumulative savings over the last five years to £3.5 billion. This year’s figure is the highest since 2016/17. The ADASS 2024 Autumn Survey provided evidence of further concerns, including a projected overspend of £564 million. Since the ADASS surveys, the Government has announced changes to employer NICs. We estimate that indirect cost pressures facing councils through commissioned adult social care services as a result of these changes is £628 million.

Skills for Care’s 2024 annual report on the care workforce shows that the vacancy rate in adult social care stood at 8.3 per cent in 2023/24. This is higher than the NHS (6.9 per cent) and the wider UK economy (2.8 per cent).

Even before the announcement on NICs, we raised concerns about the increased cost of provision. We estimated that the 9.8 per cent increase in the National Living Wage to £11.44 would alone add £1.6 billion to the cost of commissioned care in 2024/25. Inflation has hit the provider sector hard too. The Homecare Association set its annual ‘minimum price for homecare’ at £28.53 per hour from April 2024, noting that the hourly fee rates for council-commissioned homecare was £21.59 per hour toward the end of 2023. Care providers are understandably issuing stark warnings on a regular basis of the pressures they face.

Demand for mental health care and support has also continued to rise. Councils support many people with mental health needs with social care in the community. They also have statutory duties under the Mental Health Act. The new Mental Health Act will rightly aim to support more people with mental crisis in the community, rather than in hospital. This will increase pressures on council-commissioned services and the workforce.

A national shortage of occupational therapists is one factor in delays to Disabled Facilities Grant (DFG) assessments, alongside shortages of contractors and materials in the construction sector. Council budgets are under severe strain making them less able to increase DFG budgets and making it harder to top up grants when the £30,000 cap is insufficient for complex adaptations. The recently announced extra £86 million in funding for DFGs will help more people, but it does not tackle underlying issues.

The consequences of these and other pressures are significant. They include growing strain on unpaid carers, inadequate investment in prevention, recruitment and retention challenges in the workforce, providers ceasing trading or handing back council contracts, and over 418,000 people waiting for a care needs assessment, the commencement of their care package or direct payment, or a review of their care plan.

Actions needed to support councils

The Casey Commission creates a new dimension to this Spending Review. While the Commission’s focus will be on adult social care, what it does, or does not do, will impact – potentially significantly – on the realisation of the Government’s health mission and 10-year plan.

Social care reforms cannot and must not be taken forward from unstable foundations; the Spending Review is therefore crucial to bridging the gap between the here and now, and the longer-term more transformational work to reimagine, and deliver, a care service fit for the future. Filling that gap requires significant stabilisation funding as well as resources to begin the process of bringing about meaningful change, including on digital technology. While the Recovery Grant is welcome, its threshold means many councils who are still facing huge pressures will not benefit.

The LGA has published evidence on the case for earlier support and prevention in adult social care. This found that earlier support interventions save over £3 for every £1 invested in them, with the potential to deliver a net benefit of over £7 billion if scaled up across all local authority areas. For example, York’s Community Operating Model focuses on early intervention, prevention and asset-based community development, bringing together social prescribing, Community Health Champions and neighbourhood action grants to empower people and reduce service demands, preventing £6.8 million of costs in 2023 and helping over 6,500 people since 2016.

We want to share local government’s expertise on what works in transforming adult social care services, and collaborate in delivering cost effective solutions to the current challenges.

Our asks are as follows:

Health and integration

Lord Darzi’s recent review of the NHS found that, “The NHS budget is not being spent where it should be — too great a share is being spent in hospitals, too little in the community, and productivity is too low”. Resources need to flow to match the three strategic shifts as set out in the Health Mission. Health and care are two sides of the same coin; for both to deliver, realise the outcomes needed, and maximise productivity, both need to be sufficiently resourced. Again, Lord Darzi highlighted that, “…13 per cent of NHS beds are occupied by people waiting for social care support or care in more appropriate settings. The result is there are 7 per cent fewer daily outpatient appointments for each consultant, 12 per cent less surgical activity for each surgeon, and 18 per cent less activity for each clinician working in emergency medicine.”

Resource allocation must recognise the scale of change and the need to try new things at a local level. This will require an element of ‘dual running’. With resources already stretched, the ability to try new things, innovate, and evaluate impact will be limited without additional investment. Local government has a strong track record of sharing and scaling good practice and this will be increasingly important as we enter this period of considerable change.

The Better Care Fund (BCF) must maintain adult social care core funding in recognition of the NHS adult social care transfer fund which preceded it and is a core element of it. Alternatively, this element of funding should be removed from the BCF, and replaced with ring-fenced funding for adult social care allocated to councils. BCF should ensure that health and social care provide the right care, in the right place at the right time so that people stay well, safe and independent at home for longer. It must focus on prevention and early support to promote independence.

System working and maximising the value of joint funding is vital. The NHS is one of local government’s most important partners. What each side does can impact the other; often positively, sometimes not. Similarly, pressures, both in terms of finances and activity, will feed from the NHS into local government and vice versa. We recognise that Government faces difficult choices on competing priorities with limited budgets. We also acknowledge the immense challenges faced by Integrated Care Systems (ICSs).

However, the financial strain on the NHS, exacerbated by reductions in Integrated Care Board running cost allowances, hinders councils' ability to deliver essential services and jeopardises the vital relationship between the NHS and local government. Issues range from difficulties with continuing healthcare and the BCF, to challenges in working collaboratively at a local level and investing in health inequalities and prevention. A key issue is the increased passing on of costs, particularly related to complex care packages, continuing healthcare, and Section 117.

Councils have a proven track record of delivering growth to their local communities. They are vital to the Government’s ambition to kickstart economic growth and meet its housing targets.

Economic growth

Our Local Government White Paper identified ‘delivering inclusive growth’ as one of the key ambitions for the sector. But we are also clear that growth must be sustainable and inclusive to all. The LGA submission to Stage 1 of the Spending Review set out the critical role that councils play in their local economies. Through the services they provide, their work on producing local economic and industrial strategies, and their crucial convening role, councils are ideally positioned to lead in place and influence drivers of growth which are intrinsically local. Councils also directly drive local growth. For instance, in the first quarter of 2023 there were a total of 1.2 million people employed in English local authorities, and councils have made billions of pounds worth of commercial investments in their local economies in recent years.

As our Local Government White Paper set out, there is an increasing body of evidence showing that productivity growth and gaps are determined at the subnational level rather than at the level of firms or the nation. This means that it is much more difficult for a top-down approach on its own to deal with these issues. International comparisons show that our current centralised approach is ineffective in addressing the challenges. If the Government wishes to succeed in its mission to kickstart economic growth, it is vital that councils are enabled to deliver for their communities.

Economic development

As highlighted in a recent LGA report, continued pressure on local government budgets falls disproportionately on non-statutory services including economic development. While the English Devolution White Paper has subsequently indicated that Mayoral Strategic Authorities will be responsible for Local Growth Plans, local authorities must play a key role in developing, and be provided adequate resources to deliver, these plans in place.

In addition, staff are often funded through short-term resources such as the UK Shared Prosperity Fund and therefore rely on fixed-term contracts. This makes the retention of talent difficult. Entry to the profession is less clear compared to other professions and lacks structured work-based or qualification routes beyond graduate entry.

The proliferation of competitive and fragmented funding pots is inefficient and wasteful. The LGA welcomes the Government’s intention to reform the growth funding landscape to rationalise the number of funds and move away from competitive bidding.

National statistics make it difficult to identify issues at a granular level or judge the impact of national and local interventions in the economy – for example, deprivation in rural or coastal communities. The LGA supports the ambitions of the National Data Library for making public sector data use work better across the public sector and economy. As data rich environments, local government must play a key role in these discussions, and public trust must be paramount throughout.

Transport

Poor local roads and bus services are a drag on delivering the Government’s mission to kickstart economic growth. Potholes and crumbling infrastructure are a cost on business. Inadequate bus networks stop people from accessing jobs and new skills opportunities. These are the symptoms of fragmented and stop-start funding.

The Government has made a good start in Phase One of the Spending Review for 2025/26 through a £500 million uplift on highways maintenance and funding certainty for bus services. This lays the foundations for better growth-enabling local transport through a long-term, multi-year, fully devolved funding settlement for local transport and highways infrastructure in line with five-year funding settlements for Network Rail, Highways England and Metro Mayors through the City Regions Sustainable Transport Settlement. Only this way can local government deliver productivity gains in highways maintenance through new technology, such as AI, and plan and deliver a pipeline of investment in roads and public transport”.

Employment and Skills

Without influence over the centralised and disjointed employment and skills system, it is difficult to join up the offer to help residents gain skills. Addressing this is vital to inclusive growth. Work Local consistently calls for local government to have the powers and funding to do this and to work more collaboratively with agencies and partners.

It is good to see the Government’s Get Britain Working White Paper reforms move toward our place-based vision. A coherent strategy is now needed to co-design these and bring individual reforms together, so they are greater than the sum of their parts.

Devolution

We know from international comparisons that devolution, can have a transforming impact on productivity. The growth witnessed in Greater Manchester in recent years is indicative of the impact that the process can have. There is an increasing body of research which indicates that greater fiscal decentralisation is linked to increased growth, more equal outcomes and reduced regional inequality.

The Government’s commitment towards 100 per cent devolution in England is positive and answers the LGA's long held ambition that every area of England can secure a devolution deal that works for them, their local economies, and their residents by the end of the decade. We also welcome the Government formalising plans for further devolution via the English Devolution Bill.

To support councils to prevent homelessness and rough sleeping Government should:

The Green Energy Mission objectives present huge opportunities for growth, jobs, health, quality of life, and energy security. Local government’s ambition and offer is enormous. Research has shown that as community and place leaders, as housing, planning, and transport authorities, as procurers, asset holders, conveners, and enablers, councils can directly influence a third of an areas’ emissions, and through a rewired relationship can achieve greater co-benefits for half the cost.

Local government receives no core funding for climate action. Instead, it competes for grants via a labyrinth of funding pots that change over time. This has put the brakes on potential, while wider funding pressures squeeze local climate ambitions. Success in delivering the Green Energy Mission relies on a rewired national/local relationship, focused on delivering projects in places.

Rewiring the national local partnership via devolution and beyond.

National and local government should urgently establish the governance framework for collaborating on delivering the Green Energy Mission. It would provide a single framework enabling delivery across in all key emitting sectors in all places, focusing on clarity on roles and responsibilities, outcome focused accountability arrangements, and multi-year capital and revenue funding, ideally via integrated settlements to all areas.

Devolution may provide huge opportunity in many places, but our 2030 and 2050 targets cannot be put on hold; all places need empowering now. The LGA has proposed that Local Climate Action Delivery Plans agreed with every area could be a vehicle for rewiring the relationship around delivering projects. The Plans would be reviewed and developed over time, working in a tailored way with places, helping every area reach its potential in tacking climate across housing, energy, transport, nature, and adaptation.

Local Plans would combine into a national Delivery Programme overseen by a partnership between local and national government. They could provide sector support tools and guidance, technical assistance, and a workforce and supply chain development plan. They could also help create a strategy to build scale with partners across places, bringing projects into programmes, and support to leverage private investment, engage local communities, and enable a just transition.

Empowering councils to deliver Green Energy Mission objectives

Local Climate Action Delivery Plans would incorporate relevant Mission delivery priorities.

Warm Homes Plan

The Warm Homes Plan can meet commitments to upgrade five million homes, and should:

Clean Power Plan

Through a rewired national local relationship, the Spending Review should back the Clean Power Plan by:

Clean transport

The Spending Review should:

Nature recovery, adaptation, and resilience

With many councils declaring ecological emergencies, the Spending Review should:

Towards a zero-waste economy

LGA research has found that proposals to extend the Emissions Trading Scheme (ETS) to waste in 2028 create large financial risk to local authorities while producers of fossil-based waste carry on unaffected. Government should:

LGA and sector-led support.

The LGA’s improvement programmes supporting net zero and sustainability transformation have helped every council across England and can play a leading role in helping central and national collaboration in delivering change in places (as set out in the previous section on Prevention).

The Government has clear ambitions to “take back our streets”. This mission and its stated aims cannot be achieved without local authorities acting as key partners. But councils need resources and not just duties, alongside radical reform of the partnership landscape.

Councils and Community Safety Partnerships (CSPs)

The Devolution White Paper and Police and Crime Bill give an opportunity to redraw the partnership landscape to drive efficiencies and better outcomes for community safety. The Government should work with councils to help secure these benefits by:

• Incentivise councils to give training and employment to ex-offenders, therefore further reducing the likelihood of re-offending.

1. Fixing the financial foundations of local government

2. Public sector reform – prevention

3. Technology-led public sector reform

4. Barriers to opportunity mission

5. Health and social care mission asks

6. Growth Mission 

 7. Green Energy Mission

8. Safer streets mission