Funding of local government 2021 to 2022: process overview

Overview of the process to determine the local government finance settlement for 2021 to 2022. The figures used are set out in Finance Circular 5/2021, as agreed by Parliament. The publication relates to general funding, and excludes any additional COVID-19 funding provided over the last year.

How were councils protected against large changes in their allocation?

After we had used the funding formula to calculate each council's share, we compared the allocations with the previous year. Naturally some councils received a larger percentage increase than others. We then set a lower limit on the change, called 'the Floor', so that each council would receive at least that increase.

To do this, first we worked out the average percentage change, comparing all bar a few areas of the formula. We then set the Floor slightly below that average. It meant that in 2021-22 councils are given at least a 1.73% increase in their regular funding.

Where the funding formula had given councils an increase greater than the Floor, they pay into a pool. This pool is then distributed to the other councils to bring them up to the Floor.

Number of councils who will receive additional funding from 'the Floor' – 10

Diagram illustrating the reduction in grant for those above the Floor, and increase for those below

For 2021-22 the funding formula gave an additional £87 million to certain councils, compared to if everyone had just received the same percentage increase. We then reallocated eighty-two per cent of this back to the other councils by the Floor process.



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