Recognising the challenges facing local authorities, the Labour government has announced plans to tackle local government funding challenges.

In the Autumn Budget an additional £4 billion was announced and £1.3 billion of this will be allocated to the 2025-6 Local Government Finance Settlement, which will target funding towards the areas which need it the most, but also have less ability to raise income locally.

A new £600 million Recovery Grant will be introduced in this bid to level up. Deprivation is being used as a proxy for this and will likely see more funding diverted from the affluent south east, to other areas such as the Midlands and north of England.

From 2026-7, funding allocation will be based on an up-to-date assessment of need and local resources.

The government’s statement pledged to fix the foundation of local government so local authorities can return to delivering the core services but warned the country faces huge financial challenges and it will be “a long, hard slog to work with councils to build from the ground up.”

Louise Gittins, chair of the Local Government Association, welcomed the moves: “It is positive today’s statement has pledged to deliver a programme of reform that fixes the foundations of local government, commits to multi-year settlements as we have previously called for, and reforms public services with a focus on prevention.

“The extra funding in the recent Budget will also help meet some, but not all, of the significant pressures in adult and children’s social care, SEND and homelessness support.”