The government has announced a major overhaul of council tax and local authority funding in England, promising a significant financial injection and new rules on tax rises.
A Multi-Billion Pound Funding Settlement
Councils across England are set to receive almost £78 billion as part of a new multi-year financial settlement, the first of its kind in over a decade. This funding is designed to provide three years of fiscal stability for local authorities.
The core spending power of councils is projected to increase by more than 23% compared to the 2024-25 financial year. This money is earmarked for essential services including rubbish collection, housing, and children's services.
Fairer Funding and Tax Rise Limits
A key aim of the reform is to promote fairness. The most deprived 10% of councils will see their funding rise by 24% per head. To support this redistribution, six councils with historically low bills – Wandsworth, Westminster, Hammersmith and Fulham, City of London, Kensington and Chelsea, and Windsor and Maidenhead – will have freedom to increase council tax as they see fit.
For other authorities, annual council tax increases will be capped at 3%, with an additional 2% precept permitted specifically for adult social care. Councils can only exceed this limit if their residents are not already paying above the national average.
Investing in Care and Communities
The settlement includes substantial investment in social care. Ministers have announced that approximately £4.6 billion in additional funding will be available for adult social care by 2028-29, which includes £500 million to improve care workers' wages. This supports the creation of a National Care Service.
Furthermore, the government is implementing a major overhaul of children's social care, backed by an unprecedented £2.4 billion investment across the multi-year settlement.
Local Government Secretary Steve Reed stated: "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."
Under the new scheme, councils will also be able to retain all additional council tax revenue from new properties, a move intended to stimulate local growth and support home ownership.
Alison McGovern, Minister of State for Local Government and Homelessness, added: "This settlement tackles [deprivation] 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."
