Labour boosts local council funding

We are fixing the foundations of local government, whilst protecting local taxpayers from excessive council tax increases. We are outlining plans to overhaul council funding to offer better value for money.

After a decade of cuts and fiscal mismanagement inflicted by the last government, compounded by spiralling inflation and a failure to grow our economy, councils of all political stripes are in crisis. The last Tory Government left behind an outdated and inefficient model that saw some councils increasing their level of reserves and others struggling to deliver services and balance budgets.

Our fiscal inheritance means that there will be tough choices on all sides to get us back on the path to recovery, and it will take time.

This Labour Government is shifting to a fairer system which will get better value for taxpayers’ money and matches funding with need.

This afternoon, we are kickstarting funding reform to end unfairness and better use taxpayer cash, boost councils in deprived areas next year amid the overhaul, provide a 3.2% real-terms funding increase for 2025-26.

The Autumn Budget announced over £4 billion in additional funding for local government services, £1.3 billion of which will go through the Local Government Finance Settlement.

Outside of the Settlement, the government has also announced additional funding to support local government across a range of priorities, including special educational needs and disabilities (SEND) and homelessness services, a guarantee of funding for the Extended Producer Responsibility for Packaging (pEPR), as well as funding for potholes.

The long overdue reforms we are setting out will ensure better value for money, alongside more money for councils to help fix the foundations of local government.

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. On average, places with a significant rural population will receive an increase of around 5% in their Core Spending Power, and will be better off this year compared with 2024-2025.