Spending Review delivers on some key LGA asks, but severe financial pressures remain
On 11 June, Chancellor Rachel Reeves set out the Government’s spending plans for the next three years, promising to invest in Britain’s renewal.
Her Spending Review 2025 (SR25) aims to deliver on key ministerial pledges, including kick-starting economic growth, building 1.5 million new homes in England, and giving children the best start in life.
It is positive that the review has delivered on some key LGA and council ‘asks’.
Funding announced for children’s services and special educational needs and disabilities (SEND) will help more children get the right support and avoid reaching crisis point.
We are also pleased to see increased investment in the Affordable Homes Programme and a commitment to a 10-year social housing rent settlement, which will support councils to invest in maintaining existing homes and ramping up vital new build programmes.
And a recommitment to multi-year local government funding settlements is welcome and essential for financial planning across local government.
Overall, English councils’ core spending power will go up from £69.4 billion in 2025/26 to £79.3 billion by 2028/29 in cash terms, a 2.6 per cent average annual growth rate in real terms. However, the LGA has warned that all councils will remain under severe financial pressure.
Many will continue to have to increase council tax bills to try to protect vital local services, but further difficult decisions will need to be taken.
In its calculations of local authority spending power, the SR25 assumes all councils will increase council tax by 5 per cent a year for the three financial years from 2026 to 2029.
An increase of this scale will place a significant burden on households, and the continuing reliance on council tax and the social care precept, alongside grant, to fund adult social care is disappointing.
“Councils have a meaningful role to play in delivering key government policies – such as boosting economic growth, building homes and guiding public sector reform”
The assumption that not only the adult social care precept but also a substantial part of any council tax uplift should fund adult social care leaves little for other council services on which all residents depend.
So, while the Government faced, and continues to face, tough choices, so do councils.
In our meetings with ministers, civil servants and parliamentarians, we will continue to make clear that councils have a meaningful role to play in delivering key national government policies – such as boosting economic growth, building homes and guiding public sector reform.
For them to do so, more investment is needed in the preventative services they provide and public sector reform.
Council tax
- A 3 per cent core council tax referendum principle and a 2 per cent adult social care precept from 2023/24 to 2028/29.
The LGA says: “We have continually highlighted that council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils. This is particularly the case for social care where increases in costs and demand do not align with capacity to raise council tax. Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.”
Finance reform
- Multi-year allocations and a more up-to-date assessment of each council’s needs and resources through the local government finance settlement (LGFS).
- Simplification of funding, by consolidating government revenue funding into the LGFS.
The LGA says: “The funding system is out of date, opaque, and overly complex. We continue to press for transitional mechanisms to provide sufficient funding to ensure that no council experiences a loss of income from the Fair Funding Review, or its equivalent… Local government should be funded through general rather than ring-fenced grant funding, with a reduction in the fragmentation of government funding. There should be an end to the use of competitive bidding to allocate grant funding.”
Adult social care
- £4 billion extra for adult social care by 2028/29, compared with 2025/26.
- £100 million investment in community help partnerships, supporting adults with complex needs.
The LGA says: “The £4 billion increase… is unlikely to cover the full range of pressures that councils face, in particular inflation, demographic change, the National Living Wage and increases to employers’ National Insurance contributions. Other challenges persist, such as high numbers of people waiting for an assessment of their needs or for their care package to begin, growing strain on unpaid carers, and continued instability within the provider sector.”
Health and public health
- 3 per cent real terms growth in day-to-day spending on the NHS in England.
- £80 million a year for tobacco cessation programmes and enforcement to support delivery of the Tobacco and Vapes Bill.
The LGA says: “We are concerned that this spending review has once again overlooked public health funding for local authorities. While investment in the NHS is vital, it must be matched by a strong commitment to the public health grant, which plays a key role in building a healthier future. Our members have seen first-hand that protecting NHS budgets while cutting other essential services ultimately leads to higher costs and poorer outcomes.”
Education and SEND
- £2 billion real terms increase in core schools’ budget, equivalent to 1.1 per cent per pupil per year.
- SEND reform to be set out in a Schools White Paper in the autumn.
- £760 million spread across 2026/27 and 2027/28 to support SEND reforms.
The LGA says: “We support the Government’s commitment to reform the system that supports children and young people with SEND. Reform is needed urgently, and we await early clarification on the shape of the reforms in the Schools White Paper… Councils are facing a cumulative high needs deficit of £5 billion by 2026. It is vital that a proportion of the cash increase for schools is allocated to council high needs budgets to ensure they can continue to meet growing need for education, health and care plans.”
Children’s social care
- £555 million from the Transformation Fund from 2023/24 to 2028/29, to help more children stay with their families.
- £560 million between 2026/27 and 2029/30 to refurbish and expand children’s homes and foster care placements.
The LGA says: “While this further funding for social care is helpful, LGA analysis shows that children’s and adults’ social care faces additional cost pressures of £3.4 billion in 2025/26 compared with 2024/25. This ongoing shortfall puts services for vulnerable children and adults at risk and severely limits councils’ ability to support the government mission to break down barriers to opportunity. It will be important that financial support for vital transformation work is ongoing, given the extent of demand pressures councils are facing this year and next.”
Child poverty
- Direct assistance to families most at risk of poverty through the Healthy Start scheme.
- A new £1 billion a year (including Barnett impact) Crisis and Resilience Fund to replace the Household Support Fund.
The LGA says: “Healthy Start provides welcome support to low-income families. However, the funding has not increased since 2021 and eligibility is too tightly drawn. The LGA would like to see this addressed in the autumn as part of the Government’s child poverty strategy. The LGA has consistently asked for local welfare funding to be made long-term and sustainable. We are pleased that the Crisis and Resilience Fund has been confirmed until the end of SR25, giving councils and partners the opportunity to plan and embed services.”
Housing and homelessness
- £39 billion for affordable homes over 10 years from 2026/27.
- A 10-year social housing rent settlement from 2026 at Consumer Price Index + 1 per cent.
- £2.5 billion of low-interest loans for social housing providers to invest in new development.
- £950 million for the fourth round of the Local Authority Housing Fund (LAHF), to support local authorities in England to increase the supply of good-quality temporary accommodation.
- £100 million, including from the Transformation Fund, for early interventions to prevent homelessness.
The LGA says: “It is positive that the Government has acted on our call to increase funding for the Affordable Homes Programme. We have long made the case for councils to be empowered to build more affordable, good-quality homes quickly and at scale. The Government’s commitment to a 10-year rent settlement also marks a significant step toward establishing a sustainable funding framework for social housing, which will support councils to both invest in maintaining existing homes and ramp up vital new build programmes. The Government should also bring forward further Right to Buy reform to protect valuable housing stock, including the ability for councils to set discounts locally. Additional funding for the LAHF is also positive and will provide vital additional homes to help councils address unsustainable temporary accommodation pressures.”
Net zero
- £13.2 billion for the Warm Homes Plan (including Barnett consequentials).
The LGA says: “The LGA welcomes the commitment to the Warm Homes Plan… which has the potential to reduce energy demand, tackle fuel poverty and create homes that are warm, affordable and healthy. It is important that the Government works with councils to deliver a joined-up, long-term, devolved approach to housing retrofit in all parts of the country. Local government is uniquely able to lead, join up and target net zero action in places, for half the cost of a national approach and deliver three times the growth, jobs, skills and health benefits, according to evidence from the UK Research Institute.”
- You can read the LGA’s briefing on the SR25 in full at www.local.gov.uk/parliament/briefings-and-responses. The briefing looks at the issues highlighted on these pages in more detail, and covers additional areas including public service reform, best start in life, young people (youth services), free school meals, best start in life (family hubs and breakfast clubs), building safety, devolution and growth, transport, skills and labour markets, environment and flooding, waste and recycling, digital and artificial intelligence, police funding, prison places, and culture, tourism and sport