Councils across England hardest hit by historic funding cuts are set to receive a £440 million boost to help restore local services, clean up streets and repair potholes, as part of the government’s Final Local Government Finance Settlement.
The package forms part of a wider £78 billion settlement for local authorities and marks a significant shift towards an evidence‑based funding model that recognises deprivation and the true cost of delivering essential services.
The funding brings total new investment in local services to over £5.6 billion across the next three years, with £740 million additional funding added since the provisional settlement.
The government says the settlement represents a new era for council finance, using the latest Indices of Multiple Deprivation to determine where funding is needed most. For the first time in a decade, councils now have clarity on how much they will receive over the next three years, enabling long‑term planning and service transformation.
The £440 million uplift to the Recovery Grant will be targeted specifically at councils most affected by historic cuts, taking total funding through the Recovery Grant to £2.6 billion by 2028–29.
The government has set out several major measures in today’s announcement, including:
- £440m Recovery Grant uplift
- £39.6m for mayoral capacity
- SEND deficit support: 90% written off
- Homelessness funding uplift: £272m
- Business rates adjustment
From 2026–27, councils will operate under a new Local Outcomes Framework, focusing on housing, jobs, care, and public services.
The framework aims to reduce Whitehall micromanagement and give councils more autonomy while maintaining accountability for key priorities.
Council tax rises will be capped at 5% for most local authorities (3% core + 2% adult social care precept). Seven councils facing severe financial pressures have been granted limited additional flexibility - all below what they requested and none exceeding the national average.
Police and Crime Commissioners in six areas also receive an additional £3.50 flexibility, and one fire authority receives £5.
The government says today’s package directly addresses long‑standing regional inequalities by directing more resources to where they are needed most. The uplift will support:
- Street cleaning
- Waste services
- Local youth and leisure facilities
- Library services
- Community safety initiatives
Meanwhile, increased homelessness funding and SEND deficit relief aim to stabilise critical frontline services.
Ministers say the funding settlement represents the most significant realignment of council finance in years, ensuring that:
- Deprived areas receive more support
- Councils can plan ahead
- Vulnerable residents are protected
- Funding better reflects local needs and service pressures
Secretary of State for Housing, Communities and Local Government, Steve Reed, commented:
“We inherited a system where the communities that needed the most support were left behind. Today we’re turning the page.
“This £78 billion settlement is about real change – potholes filled, streets kept clean, older people looked after, and young people having somewhere to go in their area.
“And with an extra £440 million for areas hardest hit by historic cuts, we’re making sure every community gets its fair share.”
The government will set out further details in upcoming local government and education reform papers.
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