Earlier this month, this Government delivered the first multi-year local government finance settlement in a decade, coming good on our promise of reforming the system—which previous Governments failed to do.
After 14 years of austerity and decades of centralisation, councils around the country were on their knees. After being forced to cut libraries and youth clubs, there was nothing left—especially in the most deprived communities —as funding was not matched to need.
Our reforms tackled this head-on, delivering a fairer settlement which puts funding where it is needed most. As a result, by the end of the multi-year settlement period, the most deprived places will receive 45% more funding per head than the least deprived. Before our reforms, only around a third of councils were given the funding that broadly matched their assessed need. Our reforms bring that up to nine in 10 councils by 2028-29.
Getting funding to where it is needed is a critical step to support local government—but we are going further. For too long councils have been left footing the bill for expensive services that do not support residents quickly enough, and operating in a wider system that has not provided the right safeguards on financial risk. That is why, alongside our funding reforms, this Government are:
Resolving special educational needs and disabilities deficits by writing off 90% of councils dedicated schools grant (DSG) high needs deficits accrued to the end of 2025-26—projected to be worth over £5 billion.
Investing in prevention to end the cycle of councils footing the bill for expensive statutory services—with £2.4 billion into the Families First Partnership and £2.7 billion in homelessness, rough sleeping and domestic abuse.
Taking action to strengthen safeguards over local government borrowing—bringing forward a consultation on the use of powers to reduce capital risk.
Rebuilding the broken local audit system—including the local audit backstop programme and, through the English Devolution and Community Empowerment Bill, creating the Local Audit Office in autumn 2026.
Granting additional council tax flexibilities to seven councils with below average bills to help them reach financial sustainability.
These steps are helping to fix the foundations, but we know that recovering from the legacy of the broken local government finance system overseen by previous Governments will take time.
That is why today, I am confirming in principle support for councils in the most difficult positions. Unlike the reckless attitude of the previous Government, our approach will ensure that support is predicated on transforming services, so that councils in difficult situations move towards a sustainable recovery.