The Spending Review sees the majority of new departmental spending going towards health and care – a predictable move given the priority the public places on the NHS. But our health doesn't begin at the hospital door. Many of the essential building blocks of health, such as secure housing, good quality jobs, clean air, healthy food and transport, sit firmly outside of the NHS, with local government playing a key role in shaping them. However, real term per person day-to-day spend on public services outside the NHS, defence and education are set to fall by 1.3% between 2025/26 and 2028/29.
At first glance, there's welcome news for local government – a 2.6% real-terms increase in core spending power between 2025/26 and 2028/29, after years of austerity. But this relies on a key assumption: that council tax will increase by 5% each year. This is concerning for two main reasons. Firstly, council tax is regressive, with lower income households paying a greater share of their income. Secondly, more deprived areas have higher levels of need and worse health outcomes but less ability to raise tax. Relying on council tax to fill funding gaps risks exacerbating, rather than narrowing, existing inequality.
Additionally, much of that extra funding is likely to go towards social care, a significant pressure on local government. For many councils, increasing demand for adult social care is consuming an ever-larger share of available funding. Pressure has also been growing from the acute need for temporary accommodation and children's services. This means that even with real term increases in spend there is little room to shift to a more preventative approach that supports a healthier population by investing in wider services that support good health and reduce pressure on the NHS, such as cultural and community services and early years support.
More positively, revisiting how allocations are made from the central government block grant to local areas is welcome. Reforming outdated funding allocations is long overdue and adopting a more progressive approach to funding that follows need rather than historical precedent would be a critical step towards improving health equity nationwide.
There were also some promising steps to alleviate some of the acute pressures felt by local areas, particularly through specific funds targeting homelessness, temporary accommodation and children's services via a new Transformation Fund. Support for free school meals, and a new Crisis and Resilience Fund replacing the Household Support Fund to provide £1bn annually, will help to support lower income households. Over the longer term, committing funds to build more affordable housing and implementing a 10-year rent settlement can help local governments invest more in housing, potentially easing housing affordability pressures. However, the challenge will be to follow through on building social housing at significantly higher levels than in recent history.
An area of remaining uncertainty is the public health grant. Since 2015/16, it has been cut by 26% on a real terms per person basis – with deeper cuts in absolute spend falling in deprived areas. This funding plays a key role in supporting good health by underpinning essential local services, including smoking cessation programmes, drug and alcohol treatment and sexual health services. The full details of the health settlement are yet to be made clear but the smaller increase in the DHSC budget compared to the budget for NHS England presents a real risk that there will be no significant restoration of the grant. This risks further erosion of core prevention functions when we are seeing working-age health deteriorating and undermines local government's ability to prevent ill health, reduce demand on health services and support a healthier workforce.
After more than a decade of decline, local government funding is starting to recover. But it's a tough road ahead with a backdrop of deteriorated public services and social care funding pressures. There are glimmers of hope within the Spending Review settlement but delivering on it will depend on the details of implementation – attention needs to be focused on appropriate allocation of resources and robust delivery of plans. The choices made in the coming months will determine whether the recovery in local government funding is the start of something more transformative – or a missed opportunity to ensure the building blocks of health are in place.
