Local Government Finance Settlement 2026-27 to 2028-29

This time last year, this Government committed to delivering long-overdue reforms to local government funding, through the first multi-year local government finance settlement in a decade. Today we have delivered on that promise.

The previous Government’s funding system was not fit for purpose. It meant that cuts hit our most deprived communities hardest—the places that could least afford them. Those councils were left on their knees, with services cut to the bone. Youth clubs and libraries were sold off. Bins went uncollected and streets were left dirty. Wherever you lived, whether you got essential funding depended on 10-year-old data and out-of-date formulas. This settlement delivers transformational changes that the public, our local government partners and Parliament have long called for.

We are reconnecting funding with need. Only around a third of councils were given the funding to broadly match their assessed need before our reforms. By the end of the multi-year settlement, that will be nine in 10 councils. As a result of these changes, the most deprived places will receive 45% more funding per head than the least deprived in 2028-29.

We have consulted four times on these changes, most recently on the provisional settlement, and we are grateful for the engagement from all corners. At each stage we have listened to views to ensure we are putting funding where it is most needed. We said a year ago that fixing the broken system that we inherited would require tough decisions, and we have made them in close partnership with all who have given their time, energy and expertise. Communities across the country are lucky to have such passionate representatives committed to fighting their corner.

This settlement is about fairness. It delivers our manifesto commitment to give councils multi-year funding settlements; our pledge to realign funding with need and deprivation; our commitment to simplifying funding and ending wasteful competitive bidding; and our promise finally to reset the business rates retention system. We are also delivering a transformation in children’s social care, backed by £2.4 billion.

Today we are going even further by announcing an additional £740 million in grant funding as part of the settlement. As part of this we are confirming a £440 million funding boost to support the areas most impacted by historical funding cuts, as well as additional funding for homelessness and rough sleeping, and for mayors.

I am also pleased to announce a plan to resolve SEND—special educational needs and disabilities—deficits, which have threatened councils’ sustainability and diverted funding from essential day-to-day services. We will resolve 90% of local authorities’ dedicated schools grant high needs deficits accrued to the end of 2025-26, projected to be worth over £5 billion. All local authorities with a SEND deficit will be eligible to receive grant funding, subject to submitting and securing the Department for Education’s approval of a local SEND reform plan.

The local outcomes framework, published alongside the settlement, is an essential component of these reforms. The framework outlines national priority outcomes delivered at a local level and driven by councils as local leaders of place. Rather than micromanaging how councils decide to deliver their services, it will prioritise the outcomes that people care about the most, focusing on progress, not process. It will strengthen the way the Government support and hold councils to account for improving outcomes for their areas. As ever, I am grateful to our colleagues working in local government for their constructive support in its development.

The work does not stop here. We know that the challenges still facing local government are real and complex. Having fixed the foundations, we are ready to take the next steps to transform public services and put local government back on its feet.

The Government’s response to the consultation on the provisional settlement for 2026-27 has been published, as have details of the final settlement.

I have laid before the House the “Local Government Finance Report (England) 2026 to 2027” and the “Referendums Relating to Council Tax Increases (Principles) (England) Report 2026 to 2027”. Together, these reports represent the final local government finance settlement for 2026 to 2027.

The Government will provide over £5.6 billion of new grant funding towards local government services over the next three years. This includes announcing today an additional £740 million in grant funding as part of the final settlement for 2026-27. This takes the total new grant funding delivered through the annual settlements for 2026-27 to 2028-29 to over £4 billion.

With this new funding and other available funding in the settlement, we are today setting out:

A £440 million additional uplift to the recovery grant, aimed at the councils most impacted by cuts during austerity, bringing the total to £2.6 billion through the multi-year settlement;

A £272 million in additional allocations within the homelessness, rough sleeping and domestic abuse grant, bringing the total through the grant to £2.7 billion;

An additional £39.6 million for mayors to build their capacity, bringing the total to £138.6 million through the multi-year settlement; and

An additional £15 million over the multi-year settlement to support stand-alone fire and rescue authorities.

By the end of the multi-year settlement, we will have provided a 15.5% increase in core spending power, worth over £11.4 billion, compared to 2025-26. Since coming into power, we will have made available a 24.3% increase in 2028-29 compared to 2024-25, worth £16.6 billion.

We have listened to feedback and, as a result, have made technical changes to ensure that we more accurately reflect councils’ current income from local business rates pooling arrangements—a way that councils share risk in the business rates system. The Institute for Fiscal Studies noted that the method we used to do this assumed many districts and the City of London started with significantly more funding from pooling than they do in practice. We are committed to changing this, while providing protection for councils for the first year of this change, giving them time to adapt.

To achieve this, the Government will provide a one-off adjustment support grant in 2026-27 to authorities that would otherwise see their core spending power reduce in 2026-27, compared to indicative allocations set out at the provisional settlement. Allocations for this grant are set out within the final settlement. The pooling assumption for 2027-28 and 2028-29 will be subject to consultation at the next settlement, and we will provide an update to councils in due course.

We have heard many calls for further support to repair the damage done by the previous Government. We previously confirmed that the Government will maintain 2025-26 recovery grant allocations for all authorities across this multi-year settlement. The recovery grant was targeted at deprived places, which suffered the most from historical funding cuts. We have heard clearly through consultation feedback that more support for these areas is needed. The Government are therefore confirming today a £440 million uplift to the recovery grant, targeted towards upper-tier authorities with a funding increase of less than 17% over the period. This brings the total funding through the recovery grant, including the recovery grant guarantee, to £2.6 billion. This Government make no apologies for their commitment to reversing the effects of austerity, starting with the places that have been left behind and disrespected for too long.

We recognise that the current SEND system is not working for children or families, and nor is it working for local authorities, which continue to face significant financial pressures. The Department for Education has set out the principles for a reformed SEND system that meets needs earlier, before challenges escalate, and will set out details of these plans in the upcoming schools White Paper.

Ahead of this, we are introducing support to address local authorities’ dedicated schools grant deficits. All local authorities with SEND deficits will be eligible in 2026-27 to receive a grant covering 90% of their high needs-related DSG deficit accrued up to the end of 2025-26. This grant will be paid in autumn 2026, subject to each local authority submitting and securing the Department for Education’s approval of a local SEND reform plan.

We know that SEND reform will take time to fully embed and local authorities will need further support. For deficits that arise in 2026-27 and 2027-28, local authorities can expect that we will continue to take an appropriate and proportionate approach, although it will not be unlimited. From 2028-29, SEND spending will be covered within the Government’s DEL budget, so local authorities will not be expected to fund future SEND costs from general funds.

I am also confirming a total uplift of £272 million for the homelessness, rough sleeping and domestic abuse grant, bringing the total value to over £2.7 billion through the settlement, and £3.7 billion including funding outside the settlement. The £159 million of the uplift is funding for supported housing services, announced in the national plan to end homelessness, which we have uplifted by a further £35 million, and with which we are targeting 40 local areas with the greatest single homelessness and rough sleeping need. This additional funding will help local authorities prevent homelessness before it occurs and ensure that vulnerable people are given homes that meet their needs.

Fairness for taxpayers is at the heart of this Government’s decision making. For the vast majority of councils, the Government will maintain a core referendum threshold of 3%, with a 2% adult social care precept over the multi-year settlement. When taking decisions on council tax levels, the Government expects all authorities to carefully consider the impact on households.

Our local government finance reforms get money to where it is needed, but we recognise that some councils remain in a challenging financial position as they continue to deal with the legacy of the previous system. Some have requested additional flexibility to increase their council tax without holding a referendum next year. We have carefully considered requests from these councils and agreed to small additional flexibilities in only seven councils—less than the councils requested in all but one area. We will provide additional flexibilities so that councils can decide whether to set their council tax above 5% core referendum principles in Bournemouth, Christchurch and Poole (1.75%), Warrington (2.5%), Trafford (2.5%), Worcestershire (4%), Shropshire (4%), North Somerset (4%), and Windsor and Maidenhead (2.5%) next year. These additional flexibilities are a limit, not a target. Decisions on council tax levels are for local authorities. One fire authority will also receive an additional flexibility of £5.

In recognition of financial pressures in some police forces and the importance of public safety, the Secretary of State for Housing, Communities and Local Government and the Home Secretary have also agreed an additional £3.50 council tax flexibility for six police and crime commissioners in 2026-27, where this flexibility was critical to financial sustainability.

These are difficult decisions that are not taken lightly. In line with the approach taken last year, we have not agreed to any requests that could lead to households in those areas paying above the average council tax level.

As set out at the provisional settlement, in order to increase fairness for taxpayers and provide better value for money, we do not intend to set referendum principles in 2027-28 and 2028-29 for six unique authorities with the lowest council tax levels. Band D taxpayers in these areas are paying between £450 and £1,280 less than the average in England—the council tax bill for a house worth £5 million in parts of central London can be less than the bill for an ordinary family home in places such as Blackpool and Darlington. Removing referendum principles in these areas will enable the Government to allocate over £250 million more funding for public services in places with higher need instead of subsidising very low bills for households in these councils.

We have been clear that all authorities should take steps to protect their most vulnerable residents.

In addition, the Government have been clear that we expect local authorities seeking additional support to have robust plans to deliver the improvements and service transformation required to help them to return to financial stability over the multi-year settlement. Alongside upcoming decisions on exceptional financial support requests, we will therefore confirm arrangements for supporting councils in the most difficult positions, including targeted approaches to support invest to save in services that are more effective and more sustainable.

We know that the pressures on local government are growing. We are committed to transforming the adult social care sector. This settlement allows for around £4.6 billion additional funding available for adult social care in 2028-29, compared to 2025-26, including £500 million for the sector’s first ever fair pay agreement, which will support progress towards a national care service. That means more carers, receiving better pay, with the time to provide the high-quality, compassionate care that they want to give.

This Government are transforming children’s social care through the Families First Partnership programme, backed by £2.4 billion investment in this multi-year settlement. This will enable local services to provide families with the right support at the right time, shifting the system from expensive, statutory provision towards early-intervention and preventive support.

We have further to go: the children’s social care residential market is fundamentally broken. Our aim is to move towards a system rooted in family environments through fostering. The Government set out a plan to expand fostering for 10,000 more children by the end of this Parliament. And using the new powers in the Children’s Wellbeing and Schools Bill, we will explore how we might implement a profit cap in the residential market to ensure that public money delivers care, not profiteering.

In July last year, we announced a draft local government outcomes framework and sought feedback on how we could make outcome-based performance management as effective as possible. Today’s publication is the culmination of extensive engagement with the local government sector since then.

Following feedback, and in recognition of the contribution made by other local partners to the delivery of the outcomes, I am announcing that we have renamed the local government outcomes framework as the “local outcomes framework”. This change acknowledges, and indeed encourages, that partnership working is essential to breaking down silos in delivery and improving outcomes for citizens. But it is right that local authorities, as leaders of place, remain at the heart of driving local delivery and improvement.

The framework will be operational for the spending review period. Alongside funding consolidation and a reduction in individual grant conditions, the framework will shift the focus of central Government away from micromanaging individual activities towards a focus on the outcomes we all care about for local people. By publishing outcomes data in one place, the framework ensures transparency for residents and that central and local government measure progress through the same lens. Where outcomes are poor, we will act, but action will begin by talking to local leaders to support self-improvement and reduce barriers getting in the way of good services.

This Government are committed to giving locally elected leaders the powers and funding they need to drive growth and to deliver jobs, new homes and new transport. We are confirming almost £435 million total funding for strategic authorities through the multi-year settlement, through the mayoral capacity fund and the homelessness, rough sleeping and domestic abuse grant, to create greater alignment of the funding at a local level, avoiding needless duplication and waste. This includes an additional £39.6 million of capacity funding from the provisional settlement and an additional £98.7 million for selected mayoral strategic authorities to deliver supported housing services.

We have also taken steps into a new era of fiscal devolution in England, giving mayors the power to raise and invest money into projects that improve their local areas, raising living standards and driving growth through a new overnight visitor levy power for mayors of strategic authorities and, subject to consultation, foundation strategic authorities.

As set out in the autumn Budget and the fair funding review 2.0, the Government are improving the business rates retention system to more consistently support mayoral strategic authorities in driving growth. Options being considered include allocating MSAs a direct share of business rates, building on local growth plans, allowing more tax to be spent where it is raised and providing mayors with a share of regional growth. We will begin engagement with MSAs over the coming weeks to co-develop an offer, including considering how this could work in place of existing grant. No changes will be made to grants without local consent.

We promised that we would fix the foundations of local government by reforming funding, ensuring that local powers were at the right level, mending the broken local audit system and focusing on ambitious public service reforms.

This settlement is a landmark in the story of local government. It represents our progress reforming the services that have grown to dominate local budgets—in adult social care, children’s social care, SEND, and homelessness. Today’s announcement on SEND deficits directly responds to the pressures we have heard about from local partners. Funding for social care and homelessness will shift the system towards early intervention and prevention. We are making progress at pace on our commitment to devolve the right powers to the right levels, and to end the two-tier local government system by establishing new single-tier unitary councils. We have published a strategy to overhaul the local audit system, and the English Devolution and Community Empowerment Bill includes a range of audit measures including the establishment of the Local Audit Office in the autumn. When we are finished, councils will no longer be asked to act as caretakers; they will be asked to act as agents of renewal in building a new, better country.

This written ministerial statement covers England only.

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