England’s councils will have almost £78 billion made available for essential services next year with more money going to places with the greatest need under a radical overhaul of how local government is funded.
The funding injection is aimed at restoring pride and opportunity in left behind places, to get back what has been lost. Councils will have more resources available to bring back libraries, youth services, clean streets, and community hubs.
The money is part of the first multi-year funding Settlement in over a decade, giving councils three years of financial certainty so they can plan ahead rather than firefight year to year.
In total, by the end of this multi-year Settlement, councils will see an increase of over 23 per cent in their core spending power compared to 2024-25 to pay for services including bin collections, housing, and children’s services.
And in a turning point for the way local government is funded, the outdated system that saw some councils build up savings while others faced financial collapse has been replaced.
Instead, places are now being funded using an evidence-based system that properly recognises local circumstances and the true costs of providing services in deprived communities.
The most deprived 10 per cent of councils will see a 24 per cent per head boost to the funding available to them as a result.
All councils will be protected financially during this change, with the change to new funding amounts being phased in gradually to keep services running smoothly for residents.
Secretary of State Steve Reed said
This is a chance to turn the page on a decade of cuts, and for local leaders to invest in getting back what has been lost – to bring back libraries, youth services, clean streets, and community hubs.
Today we’re making sure every community has the funding they need to succeed.
Minister of State for Local Government and Homelessness, Alison McGovern said
Deprivation doesn’t happen by accident – it’s the result of years of broken systems and wrong priorities. This settlement tackles that head-on by directing funding where it’s needed most.
By fixing the link between funding and deprivation, we’re giving local areas the tools to create opportunities, support families, and rebuild the services that hold communities together. This is how we deliver a fairer Britain where everyone has the chance to succeed.
The £600 million Recovery Grant introduced last year will continue throughout the three-year settlement, targeted at areas hit hardest by years of underfunding.
A new Recovery Grant Guarantee will also protect upper tier councils receiving this money, giving them above-inflation increases while they adapt to the fairer funding system.
Council tax
The government will continue supporting councils as they move to the new, fairer funding system.
All councils must still manage their budgets responsibly, and council tax rises will be capped at 3 per cent per year with an extra 2 per cent allowed for adult social care. It will be entirely up to local leaders to raise that council tax.
In exceptional cases, councils can apply to raise taxes above this limit – but only if their residents don’t already pay more than average.
Six councils with historically very low bills will be given flexibility for 2 years with local leaders given the choice to use the flexibility Wandsworth, Westminster, Hammersmith and Fulham, City of London, Kensington and Chelsea, and Windsor and Maidenhead.
Around 500,000 households in these areas already have very low bills, with Band D households paying between £450 and £1,280 less in council tax than the average English household.
This temporary measure gives them the option of bringing their bills more in line with the rest of the country – making the system fairer.
Social care
The government is building a National Care Service so people get better quality care, more choice and control over their support.
And ministers have confirmed around £4.6 billion extra is made available for adult social care by 2028-29 to help make this happen – including £500 million to improve care workers’ pay.
The government is also rolling out the biggest transformation of children’s social care in a generation – backed by a historic £2.4 billion investment over the multi-year Settlement.
The Settlement also includes other major changes to make the system work better for councils and residents, including
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Fairer housing incentives letting councils keep all additional council tax from new homes to encourage local growth and home ownership.
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Simplifying the system cutting red tape by streamlining 36 funding streams worth more than £56 billion over three years and freeing up councils to focus on residents’ priorities