Ministry claims no council will see reduction in core spending power under provisional Local Government Finance Settlement, but counties cry foul over “cherry-picking”

The provisional Local Government Finance Settlement will provide £69bn for councils across the country, a real-terms increase of 3.5% from 2024-25, according to the Ministry of Housing, Communities and Local Government.

The amount includes a new emergency £600m Recovery Grant.

Under the settlement, £3.7bn of funding will also be made available to social care authorities to support adult and children’s services.

This includes £880m for the Social Care Grant – an increase of £200m compared to what was indicated last month, taking its total to £5.9bn, the Ministry said.

The Government has meanwhile confirmed it will provide £515m of funding to meet the increased costs of “directly employed” staff arising from changes to employer National Insurance Contribution (NICs). 

On the promise that no council would see a reduction in core spending power, the Ministry said: “Places with a significant rural population will on average receive around a 5% increase in their Core Spending Power to ensure rural communities have the support they need.”

The MHCLG confirmed that it would maintain the previous government’s referendum threshold for council tax, at 3%. The maximum 2% increase for the adult social care precept will also be kept.

The Ministry added that an increase to the new Children’s Social Care Prevention Grant had been confirmed, which will be uplifted from £250m to £263 million at the final Settlement early next year.

Further information on the provisional local government finance settlement, including allocations for individual councils and the MHCLG's consultation document, can be found here.  

The Ministry said it would provide confirmation of the final local government finance settlement once the four-week consultation has closed and all responses have been considered in early 2025.    

The Deputy Prime Minister, Angela Rayner, said: “Local leaders are central to our mission to deliver change for hard-working people in every corner of the country through our Plan for Change, and I know our councils are doing everything they can to stay afloat and provide for their communities day in day out. 

“We won’t take the easy option or shy away from the hard work needed to rebuild a more effective and efficient system. These kind of reforms won’t happen overnight, but we are determined to deliver fairer funding, ending postcode lotteries meaning everyone gets the support from public services they deserve.”

Minister of State for Local Government and English Devolution, Jim McMahon said:  “As a former council leader I know too well that councils have suffered from short-term solutions. But we will fix this outdated system, turning to our partners in local government, working hand in hand to bring ambitious reform and do the long-term, necessary work to rebuild the foundations, and crucially, trust.”

The MHCLG meanwhile confirmed that in 2026-27 the government is to bring forward the first multi-year settlement in a decade. The relevant consultation, Local authority funding reform: objectives and principles, can be found here.

The Ministry said: “The government is determined to make the tough decisions and fix the foundations of the local government sector, with skyrocketing demand on services and top-down Westminster-centric decision-making that has left local leaders struggling to deliver the public services communities need.”

The announcement on the provisional Local Government Finance Settlement comes in the same week that the MHCLG published the English Devolution White Paper, which anticipates a major local government reorganisation in England focusing on two-tier areas and small unitaries, and a consultation proposing the streamlining of the local audit system in England through the creation of a national body, the Local Audit Office.

The Ministry has also today (18 December) launched a ten-week consultation on a strengthened standards and conduct framework in England.

Responding to the announcements, the County Councils Network (CCN) claimed that ministers were “cherry picking” what local authorities to focus funding on in 2025.

CCN claimed that despite a further £200m increase in funding for social care, and because the Government proposes “to heavily target a large chunk of its grant funding” via a ‘Recovery Grant’ towards urban and city councils, its 37 members would be in a worse position than before the Autumn Budget.

Member councils will have to make more service reductions next year, it suggested.

On the £515m in compensation for all councils across England for the National Insurance increase, CCN claimed that its analysis showed the direct and indirect cost of the rise would amount to £488m for its councils alone, leaving the compensation falling "well short" of the additional costs faced.

CCN also criticised the abolition of the £110m Rural Services Delivery Grant, which will impact on 17 of its members, who it said would lose a further £91m in grant funding.

Cllr Barry Lewis, Finance Spokesperson and Vice-Chair of the County Councils Network, said: “While we welcome the government providing a further £200m for social care, today’s provisional Local Government Finance Settlement confirms our fears that the government is unfairly cherry picking which councils deserve the greatest financial support next year. 

“By targeting the £600m Recovery Grant on metropolitan and urban councils, the government is ignoring the fact deprivation is not the only driver of councils’ costs nor the key indicator of which councils are under the most financial distress. Instead, it is demand and market failure across adult and children’s social care and special educational needs services that are pushing councils in all regions and of political control to the brink.”

The District Councils Network also warned of potential cuts to services, saying that most of the 164 districts were likely to get little or no real-terms rise in funding in 2025-26.

“Although district councils are promised a 0.3% cash increase, this is dependent upon council tax increases and does not reflect many of the rising costs councils face,” it said.

Cllr Jeremy Newmark, Finance Spokesperson for the District Councils’ Network, said: “District councils offer incredibly good value for money, with the total cost of providing our services amounting to an average of just £183 per resident. But, after 15 years of funding reductions, there are few if any cuts left to be made which will not lead to reductions in local services.”

He added: “Rural councils, in particular, could be hit as funding is directed by the Government to more urban areas, inevitably impacting on the services received by rural communities. It costs more to provide services to sparsely populated areas and the funding system must continue to reflect this.”

However, the Special Interest Group of Municipal Authorities (SIGOMA) – a special interest group within the Local Government Association which represents metropolitan and unitary authorities outside London – welcomed the provisional settlement.

Cllr Sir Stephen Houghton, Chair of SIGOMA, said: “This is a fair settlement for councils that will provide welcome relief to the most deprived areas after a decade of disproportionate cuts and increases in demand. The distribution of the Recovery Grant has played an important part in this, helping to begin to close the significant gap between need and funding levels.

“The government are to be congratulated for their courage in taking on the unfairness of the last 14 years while also supporting the sector as a whole.

“It is very welcome that proposals to make the local government finance system fairer, more streamlined, and more sustainable are being progressed by the department. We strongly welcome the direction of travel signalled by today’s settlement and look forward to engaging with the funding reform consultation process.”