The government has announced a massive review of local government funding with a promise to make council cashflow more long term — while also tweaking the numbers for 2025-26 to plug black holes in the interim.
Ministers said a consultation would be launched next month on ending the annual council funding model, which sees local authorities left in the dark about their budgets for the following 12 months until not long before Christmas each year.
It will be launched alongside a consultation on the Provisional Local Government Finance Settlement for 2025-26, which includes a new £600 million Recovery Grant for areas most in need, an increase to the Social Care Grant by £680 million, a new £250 million Children’s Social Care Prevention Grant and the repurposing of grants to offer better value for money for the taxpayer and deliver better outcomes for local people, including the most vulnerable.
Overall, local government is expected to receive a real-terms increase in Core Spending Power of around 3.2% and no council will see a reduction in this after taking account of any increase in council tax levels
Deputy Prime Minister Angela Rayner said:
For too long councils have been let down by an outdated and inefficient funding system which has led to public services creaking and taxpayers’ money not being spent efficiently.
Whilst there’s no magic wand to fix what we’ve inherited, we’re taking the necessary steps to fix the foundations of local government by creating a fairer system and ensuring every penny is spent on the services so many people rely on every day.
The leader of Manchester Council Bev Craig writing on X said
“ Welcome news. Since 2010 Manchester has seen the equivalent of £443m stripped from its annual budget.
The Tories promised another cut. Great to see @UKLabour move towards helping the most deprived areas and increase the total pot for local councils across the country”
Further consultations are planned before the final proposals will be developed, published and again consulted on ahead of the provisional settlement for 2026-2027 – ensuring the views of local leaders are reflected, in another demonstration of the government’s push to reset relationships with councils.
