Open consultation

Consultation: provisional local government finance settlement 2025 to 26

Published 18 December 2024

Applies to England

Scope of the consultation

Topic of this consultation

This consultation seeks views on the proposals for the local government finance settlement for 2025-26.

Scope of this consultation

This consultation seeks views, in particular from representatives of local government, on proposals for the local government finance settlement for 2025-26.^{[footnote 1]} The settlement is an annual process to distribute core resources to local government and consists of grant, council tax and locally retained business rates. Following consultation, the government will determine the final amounts of the Revenue Support Grant, and the section 31 grants distributed alongside the settlement, and their allocations to receiving authorities and the specified body, as part of determining the overall allocation of this year’s settlement made to each local authority in England.

This consultation document, together with accompanying documents including the draft Local Government Finance Report for 2025-26, notifies representatives of local government and members of the public of the government’s proposals for policies across the upcoming settlement. This includes: the general nature of the basis of Revenue Support Grant distribution; the general nature of the basis of the calculation of ‘tariff’ and ‘top up’ payments that form part of the business rates retention system; the determination of the ‘central’ and ‘local share’ of business rates for 2025-26; the general nature of the basis of the distribution of section 31 grants alongside the settlement; and council tax referendum principles set through the settlement process.

On 28 November, the government published a policy statement setting out the government’s intentions for the 2025-26 settlement and the direction of travel to fix the foundations of local government in 2026-27 and beyond. This consultation builds on and invites views on the proposals set out in that statement for 2025-26 only.

A consultation on the objectives and principles of updating how local authorities are funded through the local government finance settlement has been launched alongside this consultation: Local authority funding reform: objectives and principles

Geographical scope

These proposals relate to England only.

Basic information

Body responsible for the consultation

Local Government Finance Directorate within the Ministry of Housing, Communities and Local Government (the “Department”).

Duration

This consultation will last for 4 weeks from 18 December 2024 to 15 January 2025

Enquiries

For any enquiries about the consultation please contact: [email protected]

How to respond

We strongly request you respond through the following online form:

Provisional local government finance settlement 2025-26 consultation - Citizen Space

If you are unable to use the online form, you can email your response to the questions found in Annex B of this consultation document to: [email protected]

Responses via correspondence must make clear whether you disagree or agree with each question to ensure the statistics we collect following the consultation accurately reflect the views of local government. We will categorise responses as ‘do not have a view’ where written responses are unclear. It would be very useful if you could confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include:

• your name
• your position (if applicable)
• the name of organisation (if applicable)
• an address (including post-code)
• an email address
• a contact telephone number

About this consultation

This consultation document and consultation process have been planned to adhere to the Consultation Principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation). In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the Department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this, it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information, we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Department.

The Ministry for Housing, Communities and Local Government will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the consultation principles? If not, or you have any other observations about how we can improve the process please, contact us via the Complaints Procedure.

1. Summary of proposals

1.1 Introduction

1.1.1 This consultation paper sets out the government’s proposals for the 2025-26 local government finance settlement.

1.1.2 This chapter provides a summary of the proposals contained within the 2025-26 provisional local government finance settlement. The provisional settlement sets out the government’s proposed distribution of resources for the 2025-26 financial year. This formal consultation forms a key part of the provisional settlement. The government will consider views from representatives of local government offered in response to this consultation. The government will then publish a response to the consultation in the new year, as part of the final local government finance settlement, which will notify all local authorities in England of their final settlement allocations.

1.2 Spending Review 2024 and updating the system

1.2.1 On 30 October 2024, the Chancellor set out her Autumn Budget and announced the outcome of Spending Review 2024. This Spending Review set departmental expenditure limits for 2025-26 and announced over £4 billion in additional funding for local government services. This included £1.3 billion which will go through the settlement.

1.2.2 Beyond the settlement, the extra funding announced at the Autumn Budget includes a guarantee that local authorities in England will receive at least £1.1 billion in total in 2025-26 from the new Extended Producer Responsibility for packaging (pEPR) scheme, with each local authority guaranteed at least the level of income indicated in November’s provisional local payment figures. For social care funding delivered outside the settlement, it also includes an almost £1 billion increase to special educational needs and disabilities (SEND) and alternative provision funding, and £44 million of new funding to pilot a Kinship Allowance and create hundreds of new foster placements. Local government will also see £233 million of additional funding for homelessness services.

1.2.3 The policy statement the government published on 28 November 2024 gave councils notice of our proposals for the 2025-26 local government finance settlement, including how we intend to deliver the £1.3 billion additional funding announced at the Chancellor’s 2024 Budget.

1.2.4 Following the policy statement, the government confirmed on 18 December an increase of over £700 million in funding, bringing the total additional grant funding that will be delivered to local authorities in England through this year’s settlement to over £2 billion. The increase of more than £700 million includes:

• a further £200 million in the Social Care Grant to address pressures, taking the total uplift in the Social Care Grant in 2025-26 to £880 million;
• an uplift to the Children’s Social Care Prevention Grant, a new grant announced at the policy statement, to £263 million. This uplift will be reflected in allocations at the final settlement and will make funding available for Family Group Decision Making;
• £515 million of new funding to support councils with the costs associated with the increase in employer National Insurance Contributions (NICs). Allocations will be based on 2023-24 Revenue Outturn data and published at the final settlement. We are working directly with councils not included within the most recent RO release. A methodology note has been published as part of the provisional settlement to help authorities plan for how much they can expect to receive.

1.2.5 The policy statement also contained important information about our plans for future years. This has supported councils’ budget setting processes by giving early certainty over their funding. The consultation on the objectives and principles of funding reform has been launched alongside this consultation.

1.2.6 The proposals in this document begin to address the challenges facing local government by ensuring that funding goes to the places that need it most, while providing stability and protections to ensure that no local authority sees a reduction in their Core Spending Power in 2025-26. This consultation proposes difficult decisions that will achieve value for money and improve the overall sustainability of the sector, by targeting the places and services that need it most. This settlement reflects the government priorities of protecting taxpayers from excessive council tax increases and providing necessary funding for local authorities.

1.2.7 For 2025-26, this means that overall we are making available to local government in England a real-terms increase of 3.5% in Core Spending Power. Total Core Spending Power provided through the local government finance settlement for 2025-26 will be £69 billion, an increase of almost £4 billion on 2024-25. This Core Spending Power increase does not include the £515 million in additional funding for NICs or the £13 million uplift to the Children’s Social Care Prevention Grant.

1.3 Dedicated Schools Grant (DSG) statutory override

1.3.1 At Autumn Budget, the government announced an almost £1 billion increase to SEND and alternative provision funding. This is an important step in realising the government’s vision to reform England’s SEND provision to improve outcomes and return the system to financial sustainability. The government will work closely with parents, teachers and local authorities to take forward this work.

1.3.2 The government recognises the strain that the rising costs of SEND provision are putting on local government. In particular, the impact of the Dedicated Schools Grant (DSG) deficits on councils’ finances. We will work with the sector on a way forward. The government intends to set out plans for reforming the SEND system in further detail next year. This will include details of how the government will support local authorities to deal with their historic and accruing deficits and any transition period from the current SEND system to the reformed system. This will inform any decision to remove the statutory override. This will be underpinned by our objective to ensure local authorities can deliver high quality services for children and young people with SEND in a financially sustainable way. We will continue to work with the sector on the detail of our approach.

1.4 Summary of proposals included in the 2025-26 provisional settlement

1.4.1 Chapter 2 – Distribution of Settlement Funding Assessment (SFA): this chapter outlines the government’s proposals for distributing core settlement resources in 2025-26.

• Local authorities will see an increase in the total of baseline funding levels (BFLs) and under-indexation compensation grant as if both business rating multipliers had increased by CPI;^{[footnote 3]}
  • BFLs will increase to reflect the increase of the standard multiplier, accounting for the fact that authorities have different shares of gross rates subject to the small and standard multipliers;
  • Local authorities will be compensated for the freeze in the small business rates multiplier in 2025-26 via an increase to the calculation for under-indexation compensation;
• Before rolling in grants, we propose to provide a uniform percentage increase in Revenue Support Grant (RSG) allocations from 2024-25, in line with the change in the CPI between September 2023 and September 2024; and
• There will be no ‘negative Revenue Support Grant’.

1.4.2 Chapter 3 – Funding simplification: this chapter details the government’s proposals to simplify the local government funding landscape in 2025-26 through grant consolidation.

• We propose to roll in 4 grants into the Revenue Support Grant – maintaining their existing distributions. The grants comprise of 3 MHCLG grants – the Transparency Code, Electoral Integrity Programme and Tenant Satisfaction Measures grants (together, worth £12.1 million) – and the Department for Education’s (DfE) Extended Rights to Home to School Transport grant (£54 million);
• MHCLG’s Domestic Abuse Safe Accommodation Grant (uplifted by £30 million to a total of £160 million) will be consolidated as a new, separate line in the settlement, maintaining its existing distribution;
• Funding for several existing DfE Children’s Social Care programmes, including the Supporting Families programme (£253.5 million), Supported Accommodation Reforms (£94.5 million), Staying Put (£33.3 million), Virtual School Heads Extension for Previously Looked After Children (£7.6 million), the Leaving Care Allowance uplift (£13.4 million) and Personal Advisor Support for Care Leavers (£12.1 million) will be consolidated into a single Children and Families Grant worth £414 million. This funding will retain its 2024-25 allocations in 2025-26 and will not be included in Core Spending Power for 2025-26.

1.4.3 Chapter 4 – Council tax: this chapter details the government’s intentions for council tax referendum principles in 2025-26 which apply to the increase in the band D council tax charge set by a local authority.

• In line with OBR forecasts, maintaining the core council tax referendum limit of up to 3% from April 2025. Councils can set higher increases if they wish, via the consent of a local referendum;
• In addition, local authorities with social care responsibilities will again be able to set an adult social care precept of up to 2% without a referendum;
• A bespoke council tax referendum principle of up to 3% or £5, whichever is higher, for shire districts;
• No council tax referendum principle for mayoral combined authorities (MCAs);
• No council tax referendum principle for town and parish councils;
• A £5 referendum principle for fire and rescue authorities; and
• A £14 referendum principle for police authorities and police and crime commissioners.

It is for individual authorities to determine whether to use the flexibilities set out above, taking into consideration the pressures on households.

1.4.4 Chapter 5 – Recovery Grant

• We will introduce a new, one-off Recovery Grant, worth £600 million, to target places with greater need and demand for services (we have used deprivation as a proxy for this), and less ability to raise income locally.

1.4.5 Chapter 6 – Distribution of adult and children’s social care resources: this chapter sets out the government’s proposals for making specific funding available for social care services.

• In 2025-26, £5.9 billion will be provided through the Social Care Grant, supporting both adult and children’s social care – whilst equalising for the adult social care precept. This is an increase of £880 million compared to 2024-25. The majority of this additional funding will be allocated using our adult social care relative needs formula, while £240 million will be used to equalise the variation in yield from the adult social care precept.
• £2.6 billion will be distributed through the Local Authority Better Care Grant. This is a single grant, which consolidates the previous Discharge Fund (£500 million) into the grant which was previously the improved Better Care Fund (iBCF) (£2.1 billion). Like its predecessors this grant will be required to be pooled into the Better Care Fund (BCF). The objectives and conditions of the BCF will be set out in the 2025-26 BCF policy framework, which will be published shortly.
• £1.05 billion in 2025-26 will be distributed for adult social care through the Market Sustainability and Improvement Fund (MSIF);
• A new Children’s Social Care Prevention Grant, worth £250 million, will fund the national rollout of Family Help - a whole-family, preventative service. This will be distributed through a children’s need-based formula, which will allocate funding according to estimated need for children’s social care services. At the final settlement we will uplift the Children’s Social Care Prevention Grant to £263 million to fund the rollout of mandatory Family Group Decision Making.

1.4.6 Chapter 7 – Other grants: this chapter explains the government’s proposals for the New Homes Bonus (NHB), Rural Services Delivery Grant (RSDG), the Services Grant and the funding floor.

• There will be a final round of NHB payments in 2025-26. There will be no change to the calculations process, and allocations for 2025-26 will continue to be made in the usual way;
• The Rural Services Delivery Grant, which was worth £110 million in 2024-25, will be repurposed. The government believes this grant is outdated and does not properly assess rural need;
• The Services Grant will also be repurposed to direct funding where it is needed most and further simplify the system, by removing a grant which has significantly reduced in value in recent years. In 2024-25, the Services Grant was worth around a tenth of its value in 2022-23 (£822 million);
• The proposed funding floor will guarantee that no local authority, including any affected by these decisions, sees a reduction in their Core Spending Power in 2025-26, after taking into account the increase in council tax levels;
• In addition, the government intends to distribute £3 million to authorities who continue to be affected by increased Internal Drainage Board levies. The distribution of this funding will be confirmed later in the financial year, as in previous years;
• The government intends to maintain the additional funding that the island authorities received in 2024-25;
• The government will also hold back a small amount of grant funding as contingency in line with previous years. The government will make clear how this contingency funding will be allocated at the final settlement.

1.4.7 Chapter 8 – Impacts of these proposals: this chapter invites views and evidence on the impact that the government’s proposals may have on persons who share a protected characteristic.

1.4.8 Chapter 9 – The International Financial Reporting Standard 9: this chapter invites views on the government’s proposal to not extend the IFRS 9 statutory override beyond its current end date of 31 March 2025.

1.5 Additional information

1.5.1 All responses to this consultation will be given full consideration. However, we are best able to analyse responses submitted via the online survey. If you are unable to use the online survey, responses via correspondence must make clear whether you disagree or agree with each question to ensure the statistics we collect following the consultation accurately reflect the views of respondents. We will categorise responses as ‘do not have a view’ where written responses are unclear. An online survey link and return address for responses to this consultation, along with a full list of consultation questions, is included in Annex B. A glossary of technical terms can be found in Annex C.

1.5.2 We encourage all respondents to reply to all questions, regardless of whether you are directly impacted by the proposals, in order that this government can assess the views of respondents as a whole.

1.6 Allocations for proposals

1.6.1 The supporting tables accompanying this consultation show the allocations for the proposals for individual local authorities. They do not include the further funding for National Insurance contributions (NICs), worth £515 million or for Family Group Decision Making, worth £13 million, as announced on 18 December and outlined in paragraph 1.2.4. This funding will be reflected in Core Spending Power figures at the final settlement. These proposals represent the government’s intentions, and the figures are based on available information.

1.6.2 Data changes, new information or errors identified by either the Department or local authorities between the publication of this consultation paper and the calculation of the final local government finance settlement may lead to changes to individual local authority allocations. The government encourages local authorities to check their individual allocations. We ask local authorities to contact the Department with any concerns over the accuracy of their individual allocations. We will set out the final local authority allocations at the final settlement, following the conclusion of this consultation.

2. Distribution of the Settlement Funding Assessment

2.1 Introduction

2.1.1 This chapter outlines the government’s proposals for distributing the Settlement Funding Assessment (SFA) in 2025-26, which is comprised of Revenue Support Grant (RSG) and baseline funding levels (BFLs).

2.2 Business rates retention

2.2.1 When the business rates retention system was introduced in 2013-14, the government committed that BFLs and business rates baselines (BRBs), which are used to determine tariffs and top-ups, would be fixed in real terms until the system was reset, but with adjustments in response to business rates revaluations. The government confirmed in the policy statement, published on 28 November 2024, that we intend to reset the business rates retention system in 2026-27. This will help to fundamentally improve the way we fund councils and direct funding to where it is most needed, based on an up-to-date assessment of need, and the ability of areas to raise income from local taxes. Further detail will be set out in the consultation on the objectives and principles of the government’s proposed approach which has launched alongside this consultation.  

2.2.2 The business rates revaluation took effect from 1 April 2023, with the concurrent transferral of relevant properties from local lists to the central list. Unmitigated, these would lead to changes in the amount of business rates income collected and retained under the business rates retention system.

2.2.3 The previous government confirmed that it would adjust each local authority’s top-up or tariff to ensure that, as far as practicable, a local authority’s retained income from business rates is no more, or less, than it would have been had the revaluation not taken place. It also confirmed that it will compensate authorities for their losses from the transferral of properties to the central list. 2025-26 is the last year of the technical adjustment in response to the 2023 revaluation. Therefore, we are continuing the previous government’s approach as set out in its technical consultation on the matter, each local authority will receive its final revaluation adjustment value.  

2.2.4 The Autumn Budget announced that the small business rates multiplier has been frozen for 2025-26 at 49.9p, and the standard business rates multiplier will increase to 55.5p. The government will compensate local authorities for the reduction in income, resulting from the decision to freeze the small business rates multiplier. We will continue to align this level of compensation with the default link, established by previous government policy in 2018-19, between the small business rates multiplier and the Consumer Price Index (CPI) measure of inflation between September 2023 and September 2024. This inflationary uplift will be paid through under-indexation grant. Separately, baseline funding levels (BFLs) will increase by applying the rise in standard multiplier to a weighted proportion of each individual local authority’s BFL. Increases will be applied via a weighted average, specific to each local authority, to account for the fact that authorities have different shares of business rates income attributable to the small and standard multiplier.

2.2.5 There will be no ‘negative Revenue Support Grant’ in this settlement. This is consistent with the previous government’s commitment, made during the implementation of the business rates retention system in 2013-14, that local authorities’ retained business rates baselines would be fixed in real terms until the business rates system was reset.^{[footnote 4]}

2.2.6 All current region-wide enhanced business rates retention arrangements will continue for 2025-2026. Under existing arrangements, some local authorities work collaboratively with MCAs in their area to ensure a portion of the extra income is directed to the local growth priorities across the wider region. The current patchwork of business rate retention arrangements allows only certain areas to benefit from enhanced retention of growth in business rates. As part of the government’s reform of funding for local government, we will consider how a new model of business rate retention could better and more consistently support Strategic Authorities to drive growth.

2.2.7 In 2024-25, every authority in England will receive a share of £100 million accumulated surplus from the business rates levy account. This will be distributed on a one-off basis based on each local authority’s 2013-14 Settlement Funding Assessment in line with relevant legislation. Local authorities will receive payment for their share of the £100 million levy account surplus by 31 March 2025. Detailed allocations for each local authority will be published at the final local government finance settlement.

2.3 Distribution of Revenue Support Grant

2.3.1 To provide stability in local authority allocations, the government proposes to increase 2024-25 Revenue Support Grant levels in line with the September 2023 to September 2024 change in the Consumer Price Index (CPI). This increase is worth around £50 million. This is before accounting for the grants we propose to roll into Revenue Support Grant, as explored in chapter 3.

Question 1

Do you agree with the government’s proposals for the Settlement Funding Assessment, including payment of Revenue Support grant and the basis of calculation of tariffs and top ups, in 2025-26?

3. Funding simplification

3.1 Introduction

3.1.1 This chapter details the government’s proposals to simplify the local government funding landscape in 2025-26 through grant consolidation.

3.1.2 The government is committed to resetting the relationship with local government, and as part of this, we intend to radically simplify and de-ringfence the funding paid out to the sector – consolidating grants into the settlement wherever possible. This will give local authorities greater certainty and greater freedom to deliver their own priorities, as well as our national priorities. The proposals for rolling grants into the 2025-26 settlement outlined below represent only the first stage of this work, and we intend to go much further on funding simplification at the 2026-27 settlement.

3.2 Rolling in grants to the Revenue Support Grant

3.2.1 For 2025-26 we propose to consolidate 4 grants into the Revenue Support Grant: three MHCLG New Burdens grants, totalling £12.1 million, and one DfE grant worth £54 million:

• Electoral Integrity Programme (£4.6 million);
• Tenant Satisfaction Measures (£3.9 million);
• Transparency Code grant (£3.6 million); and
• Extended Rights to Home to School Transport grant (£54 million).

These grants will maintain their existing distributions. We have restated historic Core Spending Power (CSP) where applicable for rolled in grants to provide a reasonable year on year comparison of CSP. 

3.3 The Domestic Abuse Safe Accommodation Grant

3.3.1 We propose to consolidate the Domestic Abuse Safe Accommodation grant (worth £160 million, which reflects an uplift of £30 million for 2025-26) as a new, separate line in the settlement, maintaining its existing distribution.

3.4 Children and Families Grant

3.4.1 The government proposes to consolidate 6 children’s social care programmes previously funded by the Department for Education into a new Children and Families Grant. The total of this grant is £414 million, including £253.5 million for Supporting Families. The programmes include:

• Supporting Families (£253.5 million);
• Supported Accommodation Reforms - New Burdens to LAs (£94.5 million);
• Staying Put (£33.3 million);
• Virtual School Heads Extension for previously looked after children (£7.6 million);
• Leaving Care Allowance uplift (£13.4 million); and
• Personal Advisors (£12.1 million).

3.4.2 Funding for each component will maintain its 2024-25 distribution to local authorities in 2025-26. This grant will not form part of Core Spending Power in 2025-26.

3.4.3 Conditions placed on the Children and Families Grant will be published in full alongside the final settlement. The government expects that this grant will support local authorities that are currently spending on preventative services to continue their level of spend.

3.5 Local Authority Better Care Grant

3.5.1 The £500 million Discharge Fund which was allocated to local government in 2024-2025, has been consolidated into the Local Authority Better Care Grant. The Local Authority Better Care Grant was formerly known as the Improved Better Care Fund (valued at £2.1 billion in 2024 to 2025) and, together with the consolidated Discharge Fund, forms the minimum local government revenue contribution to the Better Care Fund, with a value of £2.6 billion in 2025 to 2026. Further details are set out in chapter 6 which covers the distribution of adult and children’s social care resources.

Question 2

Do you agree with the government’s proposals to consolidate grants into the local government finance settlement in 2025-26?

4. Council tax

4.1 Council tax

4.1.1 Whilst the framework for council tax is set by the government, decisions on council tax levels are a matter for councils. The government is committed to ensuring residents will have the final say over excessive council tax increases, continuing the policy of the previous government. The council tax referendum provisions are not a cap, nor do they force councils to increase to the threshold level. Should a referendum on excessive increases be held by a council, they will be able to make the case for higher increases to their local electorate. The excessive increase can only be made if a majority of the local electorate agree to it.

4.2 Council tax referendum principles

4.2.1 Referendum principles apply to the increase in the band D council tax charge set by a local authority. For 2025-26 the government proposes a core referendum threshold of 3%.  Local authorities with social care responsibilities will also be able to set an additional adult social care precept of up to 2% per year without a referendum. This approach maintains the policy of the previous government and is in line with the OBR forecast.

4.2.2 The following flexibilities are also proposed:

• A bespoke flexibility of up to 3% or £5, whichever is higher, without a referendum for shire districts;
• Fire and rescue authorities will be able to set an increase of up to £5 without a referendum;
• Police authorities and police and crime commissioners (PCC) will be able to set an increase of up to £14 without a referendum.

4.2.3 As with previous years, where a council in need of exceptional financial support views additional council tax increases as critical to maintaining their financial sustainability, the government will consider requests for bespoke referendum principles. Local proposals will be considered on a case-by-case basis. The government expects that additional increases would only be agreed in exceptional circumstances, and following careful consideration of a councils’ specific circumstances, such as their existing levels of council tax relative to the average, the potential impact on local taxpayers, and the strength of plans to protect vulnerable people.

4.2.4 The referendum principles will be subject to the approval of the House of Commons alongside the final local government finance settlement. It is for individual authorities to determine whether to use the flexibilities, taking into consideration the pressures many households are facing.

4.3 Council tax referendum principles for mayoral combined authorities

4.3.1 To date, the government has not set referendum principles for mayoral combined authorities, except where the Mayor exercises police and crime commissioner functions, in which case the PCC principle has been applied to the police precept.

4.3.2 The government proposes to continue this approach in 2025-26 in the expectation that mayors will charge a level of council tax that is affordable and proportionate to their needs. In line with the referendum principle for police and crime commissioners, we propose to set a £14 threshold for the PCC component of the Greater Manchester, West Yorkshire and York and North Yorkshire Combined Authorities’ precepts.

4.4 Council tax referendum principles for town and parish councils

4.4.1 To date, no referendum principles have been set for town and parish councils. This approach was contingent on town and parish councils taking all available steps to mitigate the need for council tax increases. The government proposes to continue with this approach.

Question 3

Do you agree with the proposed package of council tax referendum principles for 2025-26?

5. Recovery Grant

5.1 Recovery Grant

5.1.1 The government will introduce a new, one-off Recovery Grant, worth £600 million, to target places with greater need and demand for services (we have used deprivation as a proxy for this), and less ability to raise income locally. This will start to correct the unfairness of the current system by putting councils in these areas on a more stable footing. The grant lays the foundations for funding reform, ahead of bringing forward more fundamental improvements to the way we fund councils, based on an up-to-date assessment of need and resources, from 2026-27. This grant will not be ringfenced, nor will we impose grant conditions on its use.

5.1.2 The government is clear that this grant is not full reform. The formulas in the current system were last updated in 2013-14, some include data from 2001. In this context, the government believes that action must be taken this year. We recognise that the metrics in this grant will not be as sophisticated as a fully updated assessment of need, but deprivation is the best available proxy. The initial consultation on the objectives and principles of funding reform, that has been launched alongside this consultation, proposes a much fuller and sophisticated assessment of need and resources.

5.1.3 The Recovery Grant will be distributed using a simple formula, based on the most recent publicly available deprivation, population and taxbase metrics. The grant will support places where, weighted by population, deprivation outweighs council tax raising ability. The grant is intended to be highly targeted, meaning that not all authorities will receive an allocation. A technical note on the formula’s methodology has been published alongside this consultation.

5.1.4 To ensure the grant is spread more evenly between areas with greater demand and need for services, and less ability to raise income through council tax locally, allocations are capped at 3% of Core Spending Power. To ensure that all authorities in scope receive a meaningful allocation, we have applied a de minimis allocation of £10,000. The funding remaining after imposing the cap and de minimis is then redistributed to all local authorities remaining within the limits.

Question 4

Do you agree with the government’s proposals to introduce the Recovery Grant for 2025-26?

6. Distribution of adult and children’s social care resources

6.1 Social care

6.1.1 The government recognises the important role councils have in commissioning and delivering adult and children’s social care services. To support social care authorities to deliver these key services in light of pressures, the government has announced a further £200 million for adult and children’s social care. This is in addition to the funding for social care set out at the policy statement, as outlined in chapter 1. This will be allocated via the Social Care Grant, bringing the total increase in the Social Care Grant to £880 million next year. We will make available up to £3.7 billion additional funding for social care authorities in 2025-26.

6.1.2 Councils should use their resources to support social care outcomes and to provide services which help people stay at home, where possible councils should invest in preventative approaches to low level community care.

6.1.3 We expect local authority spending on adult social care to increase to reflect demand and cost pressures. The Department of Health and Social Care (DHSC) will monitor local authority budgets and spending in 2025-26, with an expectation that local authorities make appropriate use of the following sources of income to support adult social care outcomes:

• Grant funding for adult social care as part of Market Sustainability and Improvement Fund (MSIF), Local Authority Better Care Grant, and an appropriate share of Social Care Grant.
• An appropriate share of £600 million ‘Recovery Grant’ and £50 million uplift to Revenue Support Grant funding.
• The resources raised in 2025-26 from the adult social care precept, which makes available around £650 million.
• We also expect local authorities to make use of increases in other income, including an appropriate share of the 3% council tax uplift, which makes available around £970 million.

6.1.4 DHSC will publish monitoring data and facilitate additional conversations to support councils, where required. DHSC will continue to work with the Care Quality Commission to assess local authority performance.

6.2 Social Care Grant 

6.2.1 The government proposes to increase allocations of the Social Care Grant to £5.9 billion in 2025-26. This is an increase of £880 million compared to 2024-25. As with the current grant, the Social Care Grant can be used on either adult or children’s social care services.

6.2.2 The government intends to use £240 million of the total increase to maintain the component of the Social Care Grant which is used to equalise the variation in yield from the adult social care precept, in recognition of the differing abilities to generate income from council tax increases. This year we are increasing the rate of equalisation to reflect the growth of the taxbase since adult social care precept equalisation was introduced. The remaining Social Care Grant funding will be distributed using the adult social care relative needs formula.

6.2.3 The government proposes that the Social Care Grant remains ringfenced for adult and children’s social care.

6.3 Local Authority Better Care Grant

6.3.1 In 2025-26, local authorities will receive £2.6 billion through the Local Authority Better Care Grant to provide their minimum revenue contribution to the Better Care Fund (BCF). This grant has been created following the consolidation of the two previously existing grants known as the improved Better Care Fund (iBCF) and the Discharge Fund.

6.3.2 The grant will be required to be pooled as part of the BCF and will be distributed using the current iBCF methodology. The forthcoming BCF policy framework for 2025-26 will set out further details on how local authorities should work with their local NHS partners and wider public services to plan their integrated use of the BCF. Supporting the recovery of urgent and emergency care services remains a priority, and local areas will be expected to use the grant to reduce delayed hospital discharges, as part of meeting the objectives that will be set out in the framework. 

6.4 Market Sustainability and Improvement Fund

6.4.1 The government is making £1.05 billion available for local authorities for adult social care, as part of the Market Sustainability and Improvement Fund (MSIF).

6.4.2 The government proposes to distribute this funding using the existing adult social care relative needs formula. 

6.4.3 As with the fund in 2023-24 and 2024-25, there will be reporting requirements placed on the MSIF; the Government will provide further details on reporting and grant conditions in due course. 

6.5 Children’s Social Care Prevention Grant

6.5.1 The government is putting £250 million of new funding into a new Children’s Social Care Prevention Grant. This will be used, alongside funding in the Children and Families Grant (see chapter 3), to invest in the national rollout of Family Help. Family Help is a preventative, whole-family service. Families experiencing complex challenges will be supported through one multi-agency child protection team, that will provide a single, joined up offer of help and protection.

6.5.2 The Children’s Social Care Prevention Grant will be distributed using a children’s needs-based formula, which will allocate funding according to estimated need for children’s social care services. Alongside the interim formula, the variation in the cost of delivering services and the ability of local authorities to raise resources locally has also been taken into account to determine the grant allocations. An explanatory note on the formula’s methodology has been published alongside this consultation.

6.5.3 Conditions placed on the Children’s Social Care Prevention Grant will be published alongside the final settlement.

6.5.4 At the final settlement we will uplift the Children’s Social Care Prevention Grant to £263 million. This will be used to rollout mandatory Family Group Decision Making. Further details will be set out in the final settlement.

6.5.5 The two separate grants for children’s social care in 2025-26, the Children’s Social Care Prevention Grant and the Children and Families Grant (see chapter 3), is a transitional arrangement. In 2026-27, we will merge these grants and explore further consolidation in children’s services. 

Question 5

Do you agree with the government’s proposals on funding for social care as part of the local government finance settlement in 2025-26?

Question 6

Do you agree with the government’s proposal to allocate £250 million in a new Children’s Social Care Prevention Grant to invest in family help?

7. Other Grants – New Homes Bonus, Rural Services Delivery Grant, Services Grant and funding floor 

7.1 New Homes Bonus  

7.1.1 There will be a new round of New Homes Bonus (NHB) payments in 2025-26. NHB was introduced in 2011 to provide an incentive for local authorities to encourage housing growth in their areas by rewarding local authorities for net additional homes added to the council tax base.  

7.1.2 The government is not intending to change the calculation process for the NHB for 2025-26. The NHB payments will be calculated as units for reward above a payments baseline of 0.4%, multiplied by the average Band D council tax payment, with an additional payment made for affordable homes. In two-tier areas, the annual payment will be split: 80% for shire districts and 20% for shire counties.  

7.1.3 New legacy commitments ceased to be made in allocations from 2020-21, and the government confirmed in February 2021 that it did not intend to reintroduce legacy payments. These 2025-26 payments will not attract new legacy commitments. 

7.1.4 As in previous years, the allocations for 2025-26 will be funded through a top slice of the Revenue Support Grant. We expect this will be £290 million, although, as in recent years, this may change for the final local government finance settlement following confirmation of the data which local authorities provide. 

7.1.5 It is the government’s intention that 2025-26 will be the final year of the NHB in its current format and councils should consider this in their financial planning. The government is consulting on the NHB beyond 2025-26 as part of the consultation on the principles and objectives of funding reform which has been launched alongside this consultation.

7.2 Redirecting funding where it is most needed – repurposing grants and providing a funding floor 

7.2.1 The government proposes to repurpose the Rural Services Delivery Grant, which was worth £110 million in 2024-25. The Rural Services Delivery Grant does not properly account for rural need and a large number of predominantly rural councils receive nothing from it – that’s clearly not right and a sign we need to allocate funding more effectively. The government is keen to hear from councils about how best to consider the impact of rurality on the costs of service delivery, and demand, as part of the consultation on the principles of local authority funding reform that launched on the 18 December.

7.2.2 The government proposes to repurpose the Services Grant to support the government’s ambitions to reduce the number of small funding pots in the local government finance system, in response to calls from the sector. This grant has reduced significantly in recent years: in 2024-25, the Services Grant was worth £87 million, around a tenth of its initial quantum of £822 million in 2022-23.  

7.2.3 The government will guarantee that no local authority sees a reduction in their Core Spending Power in 2025-26 after taking into account the increase in council tax levels by applying a funding floor. This funding floor assumes that local authorities will use their council tax flexibility. 

7.2.4 The government assesses that the proposed funding floor will provide the protections required for authorities to sustain their services between years, whilst recognising that we must begin the process of redirecting funding to where it is needed the most ahead of implementing more fundamental reform from 2026-27.   

7.2.5 Together, this will allow us to deliver the proposals set out in this consultation and begin redirecting as much funding as possible to the places that need it most. As usual, all grant funding is considered in the round, and it is not possible to pinpoint where funding from repurposed grants has been redirected.  

7.3 Remaining funding 

7.3.1 The government intends to distribute £3 million to authorities who continue to be affected by increased Internal Drainage Board levies. The distribution of this funding will be confirmed later in the financial year once this year’s Internal Drainage Board levy data becomes available, as in previous years. As in previous years, this funding will not form part of Core Spending Power.  

7.3.2 In 2025-26, the government will maintain the 2024-25 increase in funding that the island authorities. The Isle of Wight will continue to receive the £4 million additional funding it received in 2024-25, whilst the Isles of Scilly will retain its £150,000.

7.3.3 In addition, the government intends to hold back a small proportion of grant funding as contingency. This is the same approach as previous years, where contingency has been used to cover, for example, adjustments to New Homes Bonus allocations following updated data. In the interests of transparency, the government will make clear how this contingency funding has been allocated at final settlement. 

Question 7

Do you agree with the government’s proposals for New Homes Bonus in 2025-26? 

Question 8

Do you agree with the government’s proposals to repurpose grants in order to target funding where it is needed most in 2025-26?

8. Impacts of these proposals 

8.1 Public Sector Equality Duty 

8.1.1 Public bodies have a duty under the Equality Act 2010 to consider the needs of people who share particular protected characteristics. These are: age, disability, sex, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion or belief, sexual orientation.  

8.1.2 We have considered the equalities impacts of the proposals and decisions in the provisional local government finance settlement for 2025-26. The government intends to include a summary of the equalities impacts of its proposals as part of the response to this consultation. As usual, the government response, which will include the summary of responses and the summary of equalities impacts, will be published alongside the final settlement.  

8.1.3 We would be grateful for views on the impact of the proposals contained in this consultation document on the three aims under the Public Sector Equality Duty to: 

• Eliminate unlawful discrimination, harassment, victimisation and any other conduct prohibited by the Act; 
• Advance equality of opportunity between people who share a particular protected characteristic and people who do not share it; and 
• Foster good relations between people who share a particular protected characteristic and people who do not share it.  

8.2 Foreseeable impacts of proposals on people who share protected characteristics 

8.2.1 The government has considered the relative impacts of the funding distribution on persons who share different protected characteristics by assessing the distribution of Core Spending Power (CSP) between local authorities and the characteristics of the people that live in the local authority areas.

8.2.2 Councils provide various services which people that share a protected characteristic will benefit from. Changes in the amount of flexible funding available to local authorities – whether an increase or a reduction – will affect a local authority’s ability to provide these services, and therefore impact those persons sharing protected characteristics. 

8.2.3 Local authorities understand the needs of their communities best and decide on how their resources are allocated. It is not, therefore, possible to say for certain how changes in funding will affect specific groups of persons sharing a protected characteristic, as this will be dependent on decisions that are made locally. We can, however, make reasonable assumptions about how changes in funding will affect changes in service delivery, in turn affecting service users. 

8.3 Proposed mitigations on people who share protected characteristics  

8.3.1 As part of the provisional local government finance settlement, the government is proposing an increase in the funding available to local authorities.  

8.3.2 We will be providing local authorities with a funding floor which ensures that no authority will see a reduction in their Core Spending Power in 2025-26, after taking into account the increase in council tax levels. This will help sustain service provision between years and can be used to mitigate any potential impacts on members of protected groups. 

8.3.3 We are increasing grant funding within the settlement. We expect that the increase in adult social care funding will have a positive equalities impact for protected groups, such as older age groups or people with disabilities, who are more likely to use these services. We also expect that the new Children’s Social Care Prevention Grant will have a positive impact on 0-19 year olds, in addition to parents who use Family Hubs. Family hubs will advance equality of opportunity as there will be an increase in health appointments, group activities which help increase skills for children with additional needs. 

8.3.4 Council tax referendum principles will strike a balance between protecting taxpayers (and the potential negative equalities impact of excessive increases) and funding services. 

Question 9

Do you have any comments on the impact of the proposals outlined in this consultation document on persons who share a protected characteristic? Please identify which protected characteristic you believe will be impacted by the proposals, and provide evidence to support your comments.

9. The International Financial Reporting Standard 9  

9.1 The International Financial Reporting Standard 9 

9.1.1 Since 2018, a statutory accounting override (“the override”) has been in place that allows councils to disapply part of International Financial Reporting Standard 9 (IFRS 9), which would otherwise require councils to make provision in their budgets for changes in value (gains or losses) of certain types of financial investments (pooled investment funds). The override was put in place by the previous government in response to councils’ concerns that this requirement would adversely affect their financial position and to provide time for councils to prepare for full compliance with IFRS 9. The original override was a temporary measure due to end 31 March 2023, later extended by 2 years following consultation with the sector. The override is currently due to end March 2025. 

9.1.2 The government recognises that there are differing views within the sector, regulators and other stakeholders as to whether the override should continue or be allowed to elapse. Many councils are in favour of the override being made permanent, while others have highlighted the importance of complying with IFRS 9 to improve transparency and encourage robust risk management of investments. It is the government’s view that it is important that councils comply with good accounting practice and manage the risks of their investments effectively, and therefore the government is minded to not extend the override beyond March 2025. Councils would then need to comply with the requirements of IFRS 9 from financial year 2025-26. 

Question 10

Do you agree with the government’s proposal to not extend the IFRS 9 statutory override beyond its current end date of 31 March 2025?  Please specify the financial impact, if any, on your council and any implications with respect to financial sustainability.

Annex A: Personal data

The following is to explain your rights and give you the information you are be entitled to under UK data protection legislation.

Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer    

The Ministry of Housing, Communities and Local Government (MHCLG) is the data controller. The Data Protection Officer can be contacted at [email protected] or by writing to the following address:

Data Protection Officer
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

2. Why we are collecting your personal data  

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

3. Our legal basis for processing your personal data

The Data Protection Act 2018 states that, as a government department, MHCLG may process personal data as necessary for the effective performance of a task carried out in the public interest i.e. a consultation. This consultation fulfils the mandatory statutory requirements to consult under sections 78(5), 78A(3) and paragraph of Schedule 7B of the Local Government Finance Act 1988.

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by MHCLG of a task in the public interest-in the exercise of official authority vested in the data controller. Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department i.e. in this case a consultation.

4. With whom we will be sharing your personal data

Other government departments including:

• Attorney General’s Office
• Cabinet Office
• Department for Business and Trade
• Department for Culture, Media and Sport
• Department for Education
• Department for Energy Security and Net Zero
• Department for Environment, Food and Rural Affairs
• Department for Science, Innovation and Technology
• Department for Transport
• Department for Work and Pensions
• Department of Health and Social Care
• Foreign, Commonwealth and Development Office
• His Majesty’s Treasury
• Home Office
• Ministry of Defence
• Ministry of Justice
• Northern Ireland Office
• Office of the Advocate General for Scotland
• Office of the Leader of the House of Commons
• Office of the Leader of the House of Lords
• Office of the Secretary of State for Scotland
• Office of the Secretary of State for Wales
• UK Export Finance

MHCLG may appoint a ‘data processor’, acting on behalf of the department and under our instruction, to help analyse the responses to this consultation.  Where we do, we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period

Your personal data will be held for 2 years from the closure of the consultation.

6. Your rights, e.g. access, rectification, restriction, objection

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

a. to see what data we have about you

b. to ask us to stop using your data, but keep it on record

c. to ask to have your data corrected if it is incorrect or incomplete

d. to object to our use of your personal data in certain circumstances

e. to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law.  You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: [email protected] or

Knowledge and Information Access Team
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

7. Your personal data will not be sent overseas

8. Your personal data will not be used for any automated decision making

9. Your personal data will be stored in a secure government IT system

We use a third-party system, Citizen Space, to collect consultation responses. In the first instance, your personal data will be stored on their secure UK-based server. Your personal data will be transferred to our secure government IT system as soon as possible, and it will be stored there for 2 years before it is deleted.

Annex B: Address details and list of consultation questions 

We strongly request responses through the following online form:

Provisional local government finance settlement 2025-26 consultation - Citizen Space

If you are unable to use the online survey, responses via correspondence must make clear whether you disagree or agree with each question to ensure the statistics we collect following the consultation accurately reflect the views of respondents. We will categorise responses as ‘do not have a view’ where written responses are unclear.

Written responses may be sent by email or post to: [email protected]

Or:

Local Government Finance Settlement Team
Ministry of Housing, Communities and Local Government
2nd floor, Fry Building  
2 Marsham Street  
London 
SW1P 4DF  

When replying to this consultation please confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include: 

• your name, 
• your position (if applicable)
• the name of organisation (if applicable)
• an address (including post-code)
• an email address
• a contact telephone number 

Question 1: Do you agree with the government’s proposals for the Settlement Funding Assessment, including payment of Revenue Support grant and the basis of calculation of tariffs and top ups, in 2025-26?

Question 2: Do you agree with the government’s proposals to roll grants into the local government finance settlement in 2025-26?

Question 3: Do you agree with the proposed package of council tax referendum principles for 2025-26? 

Question 4: Do you agree with the government’s proposals to introduce the Recovery Grant for 2025-26?

Question 5: Do you agree with the government’s proposals on funding for social care as part of the local government finance settlement in 2025-26?

Question 6: Do you agree with the government’s proposal to allocate £250 million in a new Children’s Social Care Prevention Grant to invest in family help?

Question 7: Do you agree with the government’s proposals for New Homes Bonus in 2025-26?

Question 8: Do you agree with the government’s proposals to repurpose grants in order to target funding where it is needed most in 2025/26?

Question 9: Do you have any comments on the impact of the proposals outlined in this consultation document on persons who share a protected characteristic? Please identify which protected characteristic you believe will be impacted by the proposals, and provide evidence to support your comments.

Question 10: Do you agree with the government’s proposal to not extend the IFRS 9 statutory override beyond its current end date of 31 March 2025?  Please specify the financial impact, if any, on your council and any implications with respect to financial sustainability.

Annex C: Glossary of technical terms 

Baseline funding level 

The amount of an individual local authority’s 2013-14 Settlement Funding Assessment provided through the local share of retained business rates income. 

Business Rates Baseline (BRB) 

An authority’s BRB is an estimate of the authority’s business rates income generating ability determined on an individual basis at the outset of the Business Rates Retention system.  

Business Rates Retention (BRR) 

Business rates are a tax on non-domestic properties. Billing authorities have a responsibility to issue bills and collect rates in their areas. Since 2013-14, local government has retained, as a whole, 50% of its business rates (excluding areas with increased Business Rates Retention arrangements). This income is subject to redistribution across local government via ‘top-ups’ and ‘tariffs’. 

Core Spending Power (CSP) 

A measure of the revenue funding available for local authority services. This includes council tax; business rates; Revenue Support Grant; New Homes Bonus; social care grants; and other grants delivered through the settlement.   This includes grant included for under-indexation of the Multipliers. This is an indicative notional number and is not to be seen as a real ‘grant’ – it is dealt with within the BRR system and the number in CSP is for indicative purposes only. 

Council tax referendum principles 

These mark levels of council tax increases (either in percentage or cash terms) above which a local authority must hold a referendum, which allows residents to approve or veto the increase. The comparison is made between the authority’s average Band D council tax level for the current financial year and the proposed average Band D for the next financial year. 

Equalisation of the adult social care precept 

We recognise that different places have different abilities to raise local council tax income from the adult social care precept. In response, we make an adjustment to offset these differences so that areas less able to raise council tax income receive a greater share of grant, called equalisation. We have done so since the adult social care precept was introduced. Equalisation is the process through which a proportion of Social Care Grant funding is used to take account of the impact of the distribution of the adult social care council tax precept.  

Local Government Departmental Expenditure Limit (LG DEL)  

The departmental budget derived from central government resources for the purposes of local government. 

New Homes Bonus  

The level of New Homes Bonus funding for an area reflects additional housing supply in that area. Most authorities receive some form of New Homes Bonus funding from central government. 

Precept  

A council tax charge from local authorities which do not issue bills themselves. These include county councils, police and crime commissioners, fire and rescue authorities, the Greater London Authority, combined authority mayors, and town and parish councils.  Billing authorities – usually shire district councils or unitary authorities – collect council tax on behalf of precepting authorities and pass the proceeds to them. 

Revenue Support Grant  

Revenue Support Grant is paid from central government to authorities as part of their allocation through the Settlement Funding Assessment (SFA). It is in addition to their local share of business rates, as long as their Revenue Support Grant allocation through the SFA methodology has not fallen to, or below, zero. 

Safety Net  

Mechanism to protect any authority which sees its business rates income drop, in any year, by more than 7.5% below their baseline funding level for that year.   

Settlement Funding Assessment  

A local authority’s share of the local government spending control total comprising its Revenue Support Grant and its baseline funding level for the year in question. 

Small and Standard Business Non-Domestic Rating Multiplier  

Properties in England will have their business rates bill calculated using a small or standard multiplier. The rateable value threshold for the standard multiplier will remain £51,000. 

Spending Review  

The Spending Review sets out the long-term spending limits for government and typically covers the next 3 or 4 years. 

Spending Round 

The Spending Round sets out the short-term spending limits for all government departments and typically covers a full calendar year. 

Tariffs and Top-Ups  

Calculated by comparing at the outset of the business rate retention system an individual authority’s business rates baseline against its baseline funding level. Tariffs and top-ups were fixed at the start of the system and have been indexed in line with the change in the small business rating multiplier up to and including 2023-24. From 2024-25 they have been adjusted in line with both the change of the small and the standard multiplier, accounting for the fact that authorities have different shares of gross rates subject to the small and standard multipliers. Tariffs and top-ups are adjusted at revaluations to neutralise rises or falls in income resulting from changes in rateable value at local authority-level.   

Tariff Authority  

An authority with a higher individual authority business rates baseline than its baseline funding level, and which therefore pays a tariff. 

Top-up Authority  

An authority with a lower individual authority business rates baseline than its baseline funding level, and which therefore receives a top-up

1. As required by section 78(5) of the Local Government Finance Act 1988. ↩

2. The small business multiplier was frozen at 49.9p for 2025-26, however the standard multiplier will increase to 55.5p in line with September 2023 to September 2024 measure of inflation. In response to the change in how business rates multipliers are calculated and applied, introduced via the Non Domestic Rating Act 2023, a proxy measure of the proportion of income in each local authority which derives from each multiplier is now used to generate a local authority-specific inflation factor from 2025-26. This uplift increases baseline funding levels, but does not give the full CPI increase, the rest of which is compensated via underindexation grant, calculated through the Department’s National Non-Domestic Rates statistical return. ↩

3. Please refer to section 5.1 of the 2019-20 local government finance settlement technical consultation for an explanation of the issue of negative Revenue Support Grant. ↩