"Fragmented" short-term government grants poor value for money, councils warn

Councils in England have seen their core funding from central government reduce by £15 billion in the last decade. In recent years, they have seen a rise in the number of short-term, ringfenced, small grants they receive annually from government departments and agencies.


A finance tracker notebook with pen

English councils received at least 448 individual government grants between 2015/16 to 2018/19 in an increasingly “fragmented and reactive” use of public funding, a new study by the Local Government Association reveals.

Councils in England have seen their core funding from central government reduce by £15 billion in the last decade. In recent years, they have seen a rise in the number of short-term, ringfenced, small grants they receive annually from government departments and agencies.

The LGA is calling for the Government to use the Spending Review to end this fragmented funding of council services and meeting demand pressures through individual grants. It has set out how the Government can provide £10 billion in additional core funding to councils to protect and improve services.

For the first time, analysis commissioned by the LGA has mapped out the grants issued by central government to councils, combined authorities, and fire and rescue authorities in England between 2015/16 to 2018/19.

This has found:

  • In any given year, councils received around 250 grants - this compares to around 61 main grants paid to local authorities in 2013/14. 
  • More than a third were discontinued from one year to the next – this is creating negative impacts on staff retention, long-term strategic planning, and joint commissioning.
  • Almost a quarter of grants issued each year were worth less than £1 million – each one equating to less than 0.25 per cent of the budget for a typical metropolitan district or London borough.
  • Around a third of the grants were awarded on a competitive basis. Often more is spent by councils in preparing bids at hugely short notice than they stand to receive back.

The LGA said many grants received by councils each year are designed to try and manage rising levels of demand pressures.

For example, homelessness services have been issued with 12 short-term funding grants since 2015 - half of these were allocated through a competitive process. This is placing extra stress on an over-stretched homelessness system, as officers are often required to scope and complete an extensive application within limited timeframes – sometimes as short as one month.

The LGA is calling for the Government to use the Spending Review to signal an end to this fragmented and reactive way of funding vital local services and tackling demand pressures. Instead helpful additional funding for councils should be delivered through primary sources of local government funding rather than individual programmes.

It wants the Government to reserve targeted funding for transformational purposes, including genuine pilots, and provide councils with long-term certainty by issuing funding through multi-year settlements tied to the life of a parliament.

Cllr Richard Watts, Chair of the LGA’s Resources Board, said:

“The use of short-term grants is increasingly representing poor value for money. Councils need certainty to plan local services without the added burden of navigating a complex and fragmented funding landscape.

“If fragmentation and ringfencing of grants is reduced, councils can provide much better value for the same amount of funding and provide services which prevent crises from happening, rather than simply managing them when it is too late.

“The Government needs to use the Spending Review to radically re-think public spending in a way that is fit for the future and empowers councils to deliver on the ambition for our communities that central and local government share.”

Notes to editors

  1. Councils in England face a funding gap of more than £5 billion by 2024 to maintain services at current levels - this figure could double amid the huge economic and societal uncertainty caused by the COVID-19 pandemic. The LGA’s detailed submission to the Comprehensive Spending Review sets out how £10 billion is needed to not only plug this gap but meet growing demand pressures and improve services for communities.
  2. Read the LGA’s report – Fragmented funding: the complex local authority funding landscape.