Explaining the Fair Funding Review 2.0

This briefing paper explains the policies set out in the government consultation document The Fair Funding Review 2.0, published in June 2025.

This consultation sets out the government’s intention to reform the distribution of funding to local authorities in England. The consultation explains how funding will be distributed for the period of the 2026-29 Spending Review. The government intends to implement this policy from the 2026/27 financial year.

The consultation does not include information about the amounts of funding that will be distributed to local authorities. These amounts will be confirmed at the next Local Government Finance Settlement, in November or December 2025.

The new distribution of funding will be decided using a relative needs formula, assessing local areas’ need for local authority services; an area costs adjustment, taking account of certain costs of providing services; and a resource adjustment, taking account of the amount of council tax revenue an authority could raise.

The needs assessment will inform the distribution of Revenue Support Grant, some other grants, and of the local share of business rate revenue.

The new funding distributions will be subject to transitional arrangements. They will be introduced gradually over the period of the three-year settlement, from 2026 to 2029. This means that in the 2028/29 financial year, local authorities’ allocations of grant funding will fully reflect the outcome of the needs assessment.