Cash-strapped English councils to get extra £600mn

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The UK government has pledged £600mn in extra funding for local government in the next financial year after a string of warnings about the financial pressures facing councils in England.

Some £500mn of the additional funds will be earmarked for social care, the Department for Levelling up, Housing and Communities announced on Wednesday, an increase that mostly benefits county and unitary councils.

A further £100mn will be made available to boost the core spending power of all councils, the department said.

The announcement comes after more than 40 Tory MPs this week threatened to vote against the local government financial settlement for 2024-25, warning of looming insolvencies, reduced services and higher taxes. The government had been resisting calls to improve its offer.

Levelling up secretary Michael Gove said: “We have listened to councils across England about the pressures they’re facing . . . We are in their corner.”

A Whitehall official credited Gove with extracting the extra funding, arguing he had “made the case forcefully to No 10 and the Treasury that councils need a lifeline”.

But the additional £500mn will only go some of the way towards plugging the £4bn deficit facing councils over the next two years forecast by the Local Government Association representative body.

Welcoming the announcement, Tim Oliver, chair of the County Councils Network representing England’s largest local authorities, said: “Whilst this extra funding will undoubtedly help us protect valued frontline services, councils, of course, still face difficult decisions when setting their budgets for 2024-25.

“Service reductions will still be necessary for councils in some areas to balance their books, while the majority of councils will still have little choice but to propose maximum council tax rises,” he added.

The additional funds bring the government’s total 2024-25 financial settlement for local government to £64.7bn, an increase of 7.5 per cent on 2023-24, according to the levelling up department.

The main representative bodies for local authorities had been warning of the risk that many more councils would be forced to issue “section 114” notices, declaring their inability to meet a legal requirement to balance the books.

The County Councils Network, which co-ordinated pressure on the government from MPs this week, said that without an improved offer councils would be forced to implement severe reductions to services and levy higher council taxes.  

The additional funds will benefit just under half of England’s 317 councils, which are responsible for social care.

Spread across the county council and unitary council network according to a relative needs formula, the social care funds will on average add £2mn-£3mn per council, according to Jack Shaw, an expert in local government and fellow at the Bennett Institute think-tank, potentially reducing some of the most severe cuts to frontline services.  

“All councils are going to be cutting some social care. Southend for example is cutting dementia care support. This may just mean they have to make fewer savings,” said Shaw.

The additional £100mn includes funds targeted at rural areas and those susceptible to flooding, as well as a boost for district councils, which “will help mitigate potentially extensive reductions to valued local services”, said Sam Chapman-Allen, chair of the District Councils’ Network.