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Councils to receive £69bn in final funding settlement
The UK government has confirmed a final finance settlement of £69bn for councils in 2025-26.
This deal represents a 6.8% cash-terms increase in core spending power compared with 2024-25 and will “guarantee no council sees a decrease” in this core revenue, the government said.
It also maintained the 5% referendum principles on council tax increases and introduced stricter measures for local authorities requesting higher council tax increases if they need exceptional financial support.
Under the new approach, increases will only be agreed for councils that are already among the lowest levels of tax, which will limit “the number and scale of additional increases”.
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The government confirmed £60m to fund long-term improvements to the local government sector in the next year, such as supporting mayoral areas that are “leading the devolution revolution” and ensuring councils use a “fit and legal audit system” in their financial reporting.
Louise Gittins, chair of the Local Government Association, said: “Extra money for councils next year, including compensation for employer national insurance contributions increases, will help meet some of the cost and demand pressures they face but still falls short of what is desperately needed to cover them all.
“This financial year therefore remains extremely challenging for councils of all types who now face having to increase council tax bills to bring in desperately needed funding next year yet could still be forced to make further cuts to services.”
The cross-party London Councils group previously called for a 7% uplift to councils’ core spending power in 2025-26.
Ms Gittins added: “Councils also recognise that having to increase council tax places yet more financial burden on households. We remain clear to government that it is not the answer to meeting the long-term pressures facing high demand national services.”
The newly announced funding will also see social care authorities receive up to £3.7bn in additional funding, including an £880m uplift to the social care grant.
A £270m children’s social care prevention grant will also be created. Community services will see over £5bn in extra funding, while a new £600m recovery grant will maximise public spending “to ensure it delivers more meaningful outcomes”.
Angela Rayner, deputy prime minister and housing secretary, said: “Councils deliver vital services across the country – driving growth and local economies and providing a lifeline for those that need it most.
“Through our plan for change, we are determined to fix the foundations of local government; investing where it is needed, trusting local leaders and working together to deliver growth, better health and social care services and the affordable homes people need.”
Jim McMahon, minister for local government and English devolution, added: “We have been clear we will fix the foundations of local government. That means an end to short-term solutions and instead rebuilding the sector to put councils on a more stable and secure footing.
“Local leaders play a crucial role in delivering the day-to-day services communities across the country rely on, which is why we want to work with them towards a fairer funding model that tackles regional inequality and prioritises outcomes for local people.”
Ms Gittins said the upcoming Spending Review – which will now happen in June rather than the spring – will be “critical” to the future of local services and “must include significant and sustained increases in overall funding for councils”.
The government’s provisional settlement was announced in December.
English councils had previously urged the chancellor to take “immediate action” to help stabilise their finances after one in four said they expect to apply for an emergency government bail-out in the next two years.
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