Background

The government has set out its three-year finance policy for local government from 2026 to 2029. Most of the detail applies to upper-tier and unitary councils, but there are clear implications for Town and Parish Councils and the environment in which they will be operating.

Here's your Rundown of what matters most.

No referendum principles for Town and Parish Councils
Town and Parish Councils remain outside council tax referendum rules, and the policy gives no indication that referendum thresholds will be applied to parishes. **A sigh of relief**, the government clearly recognises the need for flexibility, and that a percentage rise on a very small base only ever delivers a modest sum in practice.
So, while principal authorities will face limits on tax increases, parishes retain the freedom to set the precept required to fund local priorities.

Pressure on principal councils could increase the likelihood of assets and services being pushed downwards
The Fair Funding Review 2.0 will redistribute resources towards areas of higher deprivation. That means some District and Unitary Councils will lose funding or face flat cash positions once transitional protections fall away.
As principal councils adjust to the new system, expectations on parish involvement may rise, whether through asset transfers, shared arrangements, or support for community-level services.
Parishes may find that their ability to act quickly and fund small but visible services becomes more important in supporting communities where principal authorities are under pressure.

The principal authority landscape will not stay still
The government has confirmed its intention to move to a single-tier of local government in more areas and to bring an end to two-tier structures.
For Town and Parish Councils, this means:
• new relationships with successor unitary authorities
• new models of engagement on neighbourhood services
• possible changes to local boundaries or community governance in some areas
Even where reorganisation is not immediately planned, the shift towards larger local authorities continues to shape expectations of parish involvement in local service delivery.

The new Outcomes Framework will shape how principal councils work with parishes
Government will publish an Outcomes Framework for Local Government to guide how public money is used. It will become operational in spring 2026.
This will influence:
• how principal councils decide which local projects to support
• the expectations placed on parish-led schemes
• the level of reporting or evidence required when parishes receive funding or partner on services
While parishes are not directly bound by the framework, they will need to align with it when seeking support or joint working arrangements.

A review of fees and charges could affect local partnership working
Government will review sales, fees and charges across local government.
Parishes could be indirectly affected where changes are made to:
• planning related fees
• licensing charges
• environmental and facilities fees linked to devolved assets
Any adjustments to cost recovery at the principal council level may change the financial assumptions behind devolved or jointly delivered services. 

In Sum
The policy statement leaves parish powers untouched but changes the landscape around them. Parishes keep their precepting freedom and face no new restrictions. Meanwhile, principal councils will see significant reform, more complex funding transitions and, in some cases, reduced resources.
This combination means:
• more pressure on parishes to take on assets and neighbourhood services
• increased focus on evidence of outcomes when bidding for support
• greater reliance on parish capacity as principal councils manage change
• a continuing shift of activity to the grassroots, building on patterns already seen through local government reorganisation

For now, Town and Parish Councils remain anchored, while the tide of change moves around them.

Overview

The government has opened formal consultations on local government reorganisation in six areas. Seventeen proposals are now being tested, covering a wide range of single, two, three, four and five unitary options. The consultations will run for seven weeks until 11 January 2026.

This is an important point in the process. For months, councils have been developing and promoting their preferred models. In some cases this has led to open disagreements, including recent publicity disputes in Suffolk and Essex. With the statutory consultation now underway, the process moves from local positioning to a single national exercise run by government.

What is being consulted on

Across the six areas, councils have put forward:

• two proposals in East Sussex and Brighton and Hove

• four in Greater Essex

• four in Hampshire, Portsmouth, Southampton and the Isle of Wight

• three in Norfolk

• two in Suffolk

• two in West Sussex

Some proposals include boundary changes that would split districts. Ministers have already said these will need careful consideration.

Why this stage matters

The statutory consultation is different from the local engagement councils have been carrying out. Government is responsible for this stage. It invites responses from councils, public bodies, partners and residents, and then weighs all evidence against the criteria set out in the reorganisation invitation.

This is the moment when ministers form a view on which proposals, if any, should go forward, and whether they should be modified. It is also the point at which earlier publicity campaigns and disputed figures are placed in a wider, more neutral context.

What councils should be aware of

With the consultation open, councils should now:

• keep communications factual and in line with the Publicity Code

• avoid material that might be interpreted as campaigning

• support residents to understand what is being consulted on and how to respond

• make sure any engagement does not cut across the neutrality required at this stage

For councils in areas where there has been public disagreement, this is especially important for maintaining trust in the process.

Why this is significant for local areas

The outcome will shape how services are organised, how decisions are taken and how local identity is reflected in future structures. It will also influence the scale and pace of future devolution.

Read the statement

Statutory position

Under the Local Government and Public Involvement in Health Act 2007, the statutory duty to consult on structural reorganisation sits with the Secretary of State. Councils submit proposals, but central government conducts the formal consultation and takes the final decision. Councils have no statutory requirement to run their own consultation on LGR structures, although they must carry out separate processes for matters such as the creation of new parishes.

What councils are expected to do

Government and sector guidance emphasise that councils should undertake engagement, not formal consultation, whiledeveloping proposals. This includes:

• explaining the case for change
• gathering local views
• working with stakeholders
• demonstrating in their business cases how engagement has shaped proposals

Engagement is permitted and expected, but must comply with the Local Government Publicity Code, remain objective, and avoid using public funds to secure support for one reorganisation model over another.

When engagement becomes contested

Recent examples show how easily engagement can stray into accusations of campaigning.

Suffolk

District and borough leaders complained to ministers that Suffolk County Council’s “One Suffolk” campaign breached the Publicity Code and the Advertising Standards Authority code. Concerns centred on:

• claims made about projected savings and investment
• use of public funds for a campaign designed to promote a single model
• use of sponsored social media content
• commissioning external communications support to “influence” decision making

Suffolk County Council denies breaching any code and argues it is appropriate to explain its preferred model and highlight weaknesses in alternatives.

Essex

A separate dispute has arisen over Essex County Council’s leaflet promoting a three unitary model. The leaflet was posted to roughly 340,000 households at a cost just under £37,000.

Key points of contention included:

• the leaflet promoting only one of four options under consideration
• whether the leaflet clearly indicated that it was produced by Essex County Council
• claims that using taxpayer money to promote a preferred model is contrary to the Publicity Code’s requirement for objectivity and even handedness
• counter claims that other councils had publicly promoted their own preferred models through online channels

Essex County Council maintains that the leaflet is factual, complies with the Publicity Code and is intended to inform residents about a significant potential change to local services.

These two cases demonstrate how, in areas with competing proposals, engagement activity can quickly become politically charged and contested.

Why the statutory consultation sits with government

Keeping the formal consultation at national level has several advantages:

• Independence where councils disagreeCouncils within an area may support different models. A nationally run consultation avoids conflicts of interest.
• ConsistencyCentral government can run a uniform consultation process across all areas undergoing reorganisation.
• Clear accountabilityThe 2007 Act places responsibility on the Secretary of State to consult and decide, reducing risk of local challenge.
• Separation from local campaigningGovernment can discount or contextualise responses if local engagement activity is seen as partial or misleading.

Arguments for a greater local role

Some councils and people working in the sector argue that:

• councils have better access to communities and established consultation channels
• government-led consultations may feel distant or impersonal
• local authorities are better placed to interpret how views differ across localities
• limiting councils to “engagement” creates grey areas that lead to disputes, as seen in Suffolk and Essex

However, others believe that giving councils control of formal consultation would risk accusations of bias, particularly where councils support competing structures (as we are already seeing!).

Practical considerations for councils

Regardless of formal responsibilities, councils can:

• provide clear, factual information explaining the process, options and implications
• avoid slogan-led campaigns or promotional material that could be perceived as lobbying
• design engagement activities that meet recognised consultation principles (clarity, openness, fairness) even if they are not statutory
• work jointly with other councils in the area to provide neutral information platforms
• ensure communications comply with the Publicity Code, particularly around objectivity and use of public funds
• be transparent about expenditure on engagement activities.

Overall balance

The current approach seeks to balance independence and local insight:

• Government retains the statutory consultation to ensure objectivity and comparability across areas.
• Councils undertake local engagement but must avoid activities that resemble campaigning or influence the statutory consultation.

The Suffolk and Essex examples show that the boundary between engagement and lobbying can become blurred, especially where competing proposals exist. Clearer national expectations and more collaborative local communications may help reduce disputes and maintain public confidence in the process.

Read the Government letter to Council leaders

Scope

• A single standards regime is proposed for all tiers of local government in England. This covers combined authorities, principal authorities, districts, boroughs, unitary authorities, and town and parish councils.

• Ministers intend to introduce legislation when parliamentary time permits.

Core proposals

• A mandatory minimum code of conduct will be prescribed by central government.

• Councils must adopt local guidance and protocols that align with the national code.

• Every principal authority must set up a formally constituted standards committee to oversee complaints.

Conduct requirements

• The national code will set expectations for elected members’ behaviour.

• Councillors will be required to cooperate with investigations.

• Making multiple vexatious complaints will itself be a breach of the code.

Sanctions

• Standards committees will be able to suspend a councillor for a serious breach for up to six months.

• During suspension, committees may withhold allowances and apply bans on the use of premises and facilities where appropriate.

• Before imposing suspension, committees must consult at least one independent person.

Disqualification

• Current law limits disqualification mainly to custodial sentences of three months or more and to sexual offences.

• The government does not plan a new gross misconduct ground for disqualification. Instead, it will introduce interim suspension powers for cases under police investigation or awaiting sentence.

• Disqualification would apply where a councillor has been suspended twice for the maximum six months within a five year period.

Appeals

• A new national appeals function will allow councillors to appeal suspension and allowance-withholding decisions made by standards committees, after using a local right-for-review.

Consultation results

• Over 2,000 consultation responses were received from December to February.

• 94% supported a mandatory minimum code.

• Around nine in ten backed the requirement for standards committees.

Practical implications for councils

• Prepare to align local codes and guidance with a new national standard.

• Plan for a formally constituted standards committee and access to at least one independent person.

• Expect clearer powers to suspend for serious breaches, with linked decisions on allowances and access to facilities.

• Anticipate a national appeals route and keep records that support defensible decisions.

• Ensure capacity (recognising some areas have LGR limitations) to handle a likely increase in case management, especially where one authority serves many town and parish councils.

Read the Press Statement

Context

Local Government Reorganisation (LGR) often includes transferring assets and services to town and parish councils to preserve civic presence and local access. In newly parished areas, this is typically tied to the establishment of town councils with enhanced local responsibilities. Transfers of parks, halls, toilets, open spaces and community services are common.

Legal framework

• Transfers of land are made under section 123 of the Local Government Act 1972. Disposals at less than market value are lawful under the General Disposal Consent 2003 if they promote economic, social or environmental wellbeing.
• Where new parish councils are created, reorganisation orders under the Local Government and Public Involvement in Health Act 2007 can specify transfers of assets, liabilities and staff at inception.
• Section 101 of the 1972 Act allows delegation of functions to parish councils. Alternatively, services may be withdrawn by the principal authority and taken on by the parish using its own powers.
• Section 16 agreements under the 2007 Act may be used to allocate property or responsibilities between incoming and outgoing bodies during transition.
• Statutory and charitable trusts, war memorials and covenanted land must be handled according to the law governing their use and transfer.

Legal safeguards and risks

• Directions under Section 24 of the 2007 Act prevent outgoing councils from disposing of assets or entering high-value contracts without the approval of the new shadow authority.
• Subsidy control may be triggered where an asset is transferred at undervalue and later used in a way that confers advantage on a commercial party. Most transfers to parish councils for community use fall outside scope but should be assessed. 
• VAT treatment can be complex. Parish councils have partial exemption rules and may be unable to reclaim VAT on capital works without planning. Transfers involving opted-to-tax property require advice.
• Covenants and title restrictions are often overlooked. Legal checks are needed to confirm land is not subject to reverter clauses or use constraints.
• Equality and public law duties apply. Devolution decisions must be based on fair criteria and consider the impact on protected groups and service access.
• Audit scrutiny is increasing. Undocumented transfers or asset deals without justification can be challenged. Best consideration and transparency must be demonstrated.

Practice considerations

• Start early and phase. Many areas transfer simpler assets like play areas and toilets first, with phased follow-on for more complex services.
• Work jointly with local councils. Engagement avoids poor uptake or unmanaged liabilities. In some areas, town councils have proactively identified assets for transfer.
• Prepare proper documentation. Condition surveys, maintenance costs, income records and access rights should be shared. Capacity assessments at parish level help tailor the approach.
• Bundle assets where appropriate. Grouping an income source (such as a car park) with a liability (like a public toilet) is good practice where feasible.
• Use clear agreements. Transfers should include responsibilities, limitations on use, any grants or dowry, and clawback conditions where assets are to remain in public use.
• Plan for workforce implications. TUPE may apply in some cases. Even where not legally required, good practice includes engaging staff and supporting transition.
• Avoid rushed disposal pre-vesting. Delaying transfers until after reorganisation, or securing shadow authority consent, avoids breaching controls.
• Consider long-term service stability. Town and parish councils must plan for insurance, inspection regimes, governance and audit.

Financial and governance alignment

• Avoid double taxation. Where parish councils take on functions, principal authorities must stop charging for them via general tax or reclassify them as special expenses.
• Ensure precept transparency. Local councils may increase their precept, but must explain the change and link it to visible local services.
• Audit-ready records are vital. Transfers must be legally documented and properly recorded in asset registers, with appropriate valuation.
• Support equity. Small parishes may require extra assistance. Options include capacity funding, temporary staff or delivery partnerships.

Summary lessons from past reorganisations

• Early dialogue, realistic phasing and a clear legal basis lead to smoother transitions.
• Transparency on cost, condition and legal risk protects both tiers.
• Support for local councils during and after handover – including training, transitional grants and technical advice – is critical.
• Long-term service viability and democratic accountability should be built in from the start.

Listen to Dr Thomas Foreman on the Truth Behind Local Government podcast

Overview

Councillor allowances in England vary significantly, set locally on the advice of Independent Remuneration Panels (IRPs). Basic allowances range from around £6,000 in districts to £15,000 or more in counties and unitaries. Special responsibility allowances (SRAs) add substantially more for leadership roles. There is no national baseline.

Are allowances enough?

• Inflation has eroded the real value of allowances, with many frozen during austerity years.

• IRPs increasingly recommend indexation to keep pace with costs and workloads.

• Recruitment and retention pressures are rising. Low pay deters younger, working-age and less affluent candidates.

• Some councils have acted to raise allowances to more sustainable levels. Others have resisted rises on political and financial grounds.

Impact of local government reorganisation

• Many new unitary councils created through LGR have set higher allowances than predecessor authorities, reflecting larger geography, reduced member numbers, and broader responsibilities.

• Fewer councillors now represent more residents and handle full-service workloads.

• Governance models are evolving, often with area committees, requiring new SRA structures.

• IRPs have warned that allowances must not become a barrier to participation in new councils.

Town and parish councils

• Most parish councillors remain unpaid. Where allowances exist, they are modest and only used by a small number of larger town councils.

• As responsibilities grow under devolution, there is increased pressure to revisit this model.

• Participation in new forums like Local Community Networks and neighbourhood governance adds time commitment, often without recompense.

• NALC is gathering data to inform future policy and lobbying efforts, including on carers’ allowances and the case for modest basic allowances in more active parishes.

Key considerations for councils

• IRPs are placing greater emphasis on equity, access, and representativeness.

• Structural change means allowance schemes need regular review.

• Governance decisions (e.g. committee systems or area structures) have knock-on impacts for SRAs.

• As new town and parish councils emerge, remuneration expectations may need to shift to match responsibilities.

The issue

A growing number of areas in the local government reorganisation programme want to redraw maps along parish or ward lines rather than stick to whole districts. Ministers have been urged to tread carefully, as this route is complicated by law and could stretch timetables.

Who wants what

• Of the 21 two-tier areas in scope, 13 are exploring options to split existing districts.

• Government guidance told areas to use districts as building blocks unless there is a strong case for something more complex. After interim submissions, officials said boundary changes could be delivered alongside structural change.

Statutory footing

• The Local Government and Public Involvement Act 2007 allows the Secretary of State to accept a request to create new unitaries “with or without modifications”.

• The question is how far those modifications can go when carving up districts, their assets and their debts.

Compliance concerns

• The Local Government Information Unit reviewed business cases in the devolution priority programme and queried whether the “change alongside structural reform” approach is clearly compliant with the 2007 Act.

• There is a risk that proposals are drafted to look district based on paper to pass the legal test, with boundary splitting pushed to a later stage.

Litigation and timetable risk

• Deviating from the published criteria could invite judicial review if the process appears not to have been followed.

• Adding boundary rework on top of structural change could slow the overall programme due to legal challenge and the need for ministerial approvals.

Legal views

• Splitting district boundaries means splitting district assets and liabilities as well as the county’s, which complicates the orders that set out new councils and their shadow arrangements.

City pressure for change

• A group of city councils commissioned the “Case for Cities” report which argues for city led unitaries and long term backing.

• Oxford’s leader Susan Brown said the city will seek a modification to extend to the green belt boundary to help address housing and economic constraints. She argued that county resources will be split anyway, so district splits should not be seen as an extra complication.

Alternative route

• Government has also pointed to the option of forming unitaries using full districts first, then asking the Boundary Commission to conduct a Principal Area Boundary Review afterwards.

Practical takeaways for councils

• Build legally robust cases that show why any split is necessary and proportionate.

• Budget time for consultation, drafting of orders and potential challenge.

• Map the transfer of assets, staff and debt at both county and district level.

• Engage early with neighbours where city expansion is proposed to secure visible local unity.

• Keep a fallback model that uses whole districts if ministers signal tighter interpretation of the 2007 Act.

Overview

• Government has made the first of 21 planned LGR decisions this parliament. Surrey will be split into two unitary councils, not three. Ministers say this sets no precedent and future calls will be made case by case.

The decision in numbers

• Two new unitaries with populations of about 663,000 and 551,000.

• Choice aligns with earlier preferences for councils serving populations of 500,000 or more.

Why it happened

• Ministers cite the financial resilience of larger bodies, referencing unprecedented, unsupported debt in the area. The government is also writing off £500m of Woking BC debt.

What might come next

• A recent Times report says ministers have accepted evidence that medium-sized unitary authorities (around 200,000–250,000 residents) may be the most cost-effective, and that they are looking at expanding the boundaries of cities such as Exeter, Oxford, Plymouth and Nottingham as part of wider LGR proposals.

• Labour MPs have been uneasy about very large unitaries. The party has stronger interests in several cities likely to be affected, which may tilt thinking toward smaller units in some places.

Politics and choreography

• Ministers insist there is no precedent from Surrey, yet the media briefing on 200,000 to 250,000 councils appeared the day after the decision.

• Separate reporting suggested the fair funding review may be softer on London, prompting political sensitivities that the 200,000 to 250,000 line may have helped to calm.

Local voice and consultation

• The statutory consultation summary recorded a clear resident preference for three unitaries in Surrey. Ministers chose the two unitary model. This will fuel concerns that resident views may carry limited weight in future LGR calls.

Who is watching closely

• Essex will be reading across. Questions include the treatment of Thurrock’s heavy debt and whether debt arguments could favour a three council map for Essex rather than four or five.

Practical implications for councils

• Prepare multiple scenarios. Both large and medium models remain live.

• Evidence matters. Financial viability and debt exposure are central to the case.

• Expect political context to shape timing and messaging, even where ministers stress local merit-based decisions.

• Public engagement will need careful handling given the Surrey example on consultation preferences.

What to watch in the next month

• Two tier areas outside the devolution priority programme are due to submit evidence.

• Any further signals on preferred population ranges or city boundary changes.

• How the government links debt management to map choices in other indebted areas.