• New government funding formula leaves Herefordshire residents short-changed.
• Tough choices ahead to deliver savings and efficiencies while protecting services for residents.
• Despite the challenges, Herefordshire will continue to deliver the services thousands of residents rely on and maintain strong financial stewardship.
• Capital investment plan to support long-term growth across the county.

As Herefordshire Council presents its draft budget for 2026/27 it is “deeply disappointed” that the government is failing to sufficiently fund the additional costs of delivering services to residents across a rural county. Last September, we warned that the new funding formula for local councils was likely to leave a £27 million shortfall - 11% of our net budget - for the next financial year. That gap is now estimated at up to £30 million.
 
The government’s Fair Funding Review will cut £17.3 million from Herefordshire’s central funding by 2028/29, adding to previous losses such as the £7.1 million Rural Services Delivery Grant and the withdrawal of funding for a new SEND school. Limited replacement funding falls far short of meeting residents’ needs.
 
The government’s new funding model assumes local authorities will raise council tax by the maximum permitted without a referendum - 4.99% per year for the next three years - placing further strain on households already paying more in rural areas. Yet even this increase cannot close the gap created by a formula that fails to account for remoteness, increased and more complex needs for young people and an ageing population. In short, demand and costs for essential services are rising faster than funding increases.
 
Meanwhile, analysis shows that by 2028/29, most urban authorities’ spending power will allow them to spend around £100 more per resident on services than the most rural councils - further widening the disparity between urban and rural council areas.
 
To address these challenges Cabinet will consider agreeing the following proposals:

• Deliver £20 million of further savings through service reviews, cost control and efficiency measures - the largest savings target ever required.
• Manage demand for council services in high-cost, demand-led budgets.
• Using Council reserves - funds previously set aside to help provide financial stability enabling the council to manage unexpected costs and funding pressures.
• Increase income through commercial opportunities, making better use of council assets, and exploring new revenue streams.
• Regrettably, the council is left with little choice other than to propose a council tax increase of 4.99% each year of the settlement period (until 2029). 
   

Cllr Jonathan Lester, Leader of Herefordshire Council, said:

“We remain deeply disappointed by the government’s funding approach that has left Herefordshire residents short-changed - again. It is clear they have failed to sufficiently fund the additional costs of delivering services to residents across a rural county like ours. However, even with these challenges, we are determined to close the funding gap Westminster has created. We have a long-standing record of strong financial stewardship, delivering over £40 million in savings in recent years while maintaining good services.

“Unlike some councils, we won’t be seeking a bailout or government loan, or calling for 10% council tax increases. But, we will take tough but responsible decisions to control costs, protect essential services and keep the council financially sustainable.”

The draft revenue budget for 2026/27 will be considered by Cabinet on 20 January. At the same time Cabinet will consider its major works (capital) budget to invest in Herefordshire’s future, such as the Hereford Bypass, roads resurfacing, transport links, upgraded schools and heritage preservation.