Explained: What do council funding reforms mean for Bristol?
The Labour government has promised to ‘fix the foundations’ of council funding after years of austerity left local authorities up and down the country at risk of financial ruin.
But what do these changes mean in practice for Bristol? This week, councillors will vote on the city’s budget for 2025/26, including £43m of cuts despite the extra funding from the government.
The different political parties will battle it out over how best to spend the money we’ve got next year, as the council buckles under the rising cost and demand for social care, homelessness services and supporting children with Special Educational Needs and Disabilities (SEND).
But while Bristol City Council waits for promised further reforms in years to come, what is the state of the city’s coffers? We delved into the complex and confusing world of local government finance to find out.
What are the current pressures on Bristol’s budget?
Since 2010, the perfect storm of real terms funding cuts from central government alongside rising demand for and cost of services has left many council’s on the brink of going bust.
The levels of funding from government grants fell by 40% in real terms (if you take into account inflation) between 2010 and 2020. Overall, the spending power of councils reduced by 17.5% in this period, despite consistent council tax increases.
The biggest pressures right now on Bristol’s budget come from social care, arranging support for children with SEND and placing people at risk of homelessness in temporary accommodation. Pressures on housing budgets have also caused the council to pull out of council house building contracts.
The council is currently exploring lots of different ways of reducing the cost of temporary accommodation. As of the end of 2024, the council was forecasting an overspend on £4m due to temporary accommodation costs.
Such is the demand for support for children with SEND that despite funding from the Department for Education through an agreement being challenged in the courts, Bristol City Council’s deficit is expected to rise £53m at the end of this financial year.
Having a deficit is only allowed because of a temporary relaxation of the rules by the government, which runs out in March 2026. Bristol is expected to get its deficit down to zero by 2030.
What has the government announced?
As part of a big shake up to local government through merging smaller councils in two-tier areas and creating combined authorities across the country, the new government has committed to sort out the mess left by the Tories. This begins with a cash injection for local councils in 2025/26 and promises of further reforms in years to come.
The increase in core spending power, which is made up of government grants, business rates and council tax, for 2025/26 is £4.4 billion, or 6.8%. But this still leaves council funding levels below 2010 levels once you factor in inflation.
The extra funding for next year comes from increases in social care grants, as well as a one-off Recovery Grant worth £600m and £515m to cover the cost of increases in National Insurance Contributions for council employees. There is also extra funding for councils outside of the finance settlement, including an extra £233 million for homelessness services and a new income through a levy on processing packaging.
But how will all this affect Bristol?
Overall, Bristol’s core spending power will increase by £44m, or 8.6%. Nearly £27m of this comes from extra funding, including roughly £10m for adult social care, a new children’s social care prevention grant of £2.7m and a one-off £11.5m from the Recovery Grant. Bristol will also get an extra £2.4m in the Homelessness Prevention Grant – a 57% increase on last year.
The Local Government Association (LGA) has said the extra funding would help meet some cost and demand pressures but it still falls short of what is needed. Multi-year settlements and a move away from competitive bidding from 2026/27 have been welcomed by the sector, but the LGA is still calling for more to be done to create a more sustainable future funding system for local government.
What’s in the budget being voted on this week?
This week, Bristol councillors will vote on the first budget under the Greens, which includes £43m of savings in 2025/26, because even the maximum council tax hike of 5% and cash boost from the government of £44m don’t cover the rising cost of delivering key services.
Initially the council had planned to cut funding for libraries, museums and support for cultural organisations, but after backlash they have all been postponed by a year with working groups set up to find a solution. Other planned cuts taken out of the budget included £3.4million from the £44.1million Council Tax Reduction Scheme (CTRS), scrapping lollipop ladies and introducing fees for disabled parking bays.
Now it’s the turn of the other parties to suggest amendments to the budget.
Labour have proposed to reopen or create new public toilets – reversing the closures under former Marvin Rees seven years ago – invest in respite breaks for carers of disabled children, and halve the cuts to black bin collections.
These changes totalling £1m would mostly be funded by saving money in children’s social care budgets through buying more local children’s homes. The party is also proposing a feasibility study into a municipal bus company, and reducing cuts to domestic abuse services.
Meanwhile, the Tories are tabling a wishlist of more funding for libraries and museums, keeping free distinct car parking, bolstering the council’s planning and neighbourhood enforcement teams, more bleed kits and defibrillators, and road improvements. This would be funded by bringing back the £3.4m cut to the CTRS, which gives a council tax discount to the poorest households.
The Lib Dems want to do a feasibility study into introducing a visitor charge, also known as a tourist tax, where hotel guests pay an extra £2 each night. Manchester’s scheme raised £2.8m in its first year.
How bad is Bristol compared to other local authorities?
Despite how bleak this outlook feels in Bristol, it’s important to remember that there are many local authorities in even worse situations.
Five local authorities have declared effective bankruptcy in the last two years by issuing s114 notices, the government is currently intervening in seven failing local authorities, and has just announced exceptional financial support to prop up 30 councils in 2025/26. Meanwhile, six councils have had huge council tax increases approved of up to 10% to help balance their books.
The overall financial health of Bristol’s finances has been assessed as ‘medium risk’, but areas requiring action include the amount it spends on social care and its total amount of debt.
Although Bristol has had to use some of its reserves to cover costs in recent years, the level of reserves is considered healthy. But this relies on the government finding a solution to the SEND funding crisis beyond March 2026.
What next?
Many of the national reforms to how councils are funded have been welcomed across the sector. But experts have argued that more radical change is needed for local authorities to become more financially sustainable in the long term.
After all, council tax is still worked out based on 1991 house prices, which often means it’s grossly unfair. There have been calls to do a revaluation of council tax, or reform it completely, but this would be no mean feat and doesn’t appear to be on the government’s agenda.
Experts have called for councils to be given more powers to raise income locally, which is much more common in other countries, but this would be tricky politically given the economic climate and tense debate about tax and spend.
In the meantime, councils like Bristol are craving more certainty, especially what the government is going to do beyond 2026 about SEND funding, which risks pushing even more councils towards effective bankruptcy.
