Guidance

Explanatory note on Core Spending Power: provisional local government finance settlement 2025 to 2026

Published 18 December 2024

Applies to England

Summary

1. Core Spending Power (CSP) is a measure of the resources available to local authorities to fund service delivery. It sets out the money that has been made available to local authorities through the Local Government Finance Settlement. Core Spending Power includes funding available from Settlement Funding Assessment, council tax and central government grant.

Settlement Funding Assessment

2. CSP measures Settlement Funding Assessment (SFA) before adjustments for authorities with increased Business Rate Retention arrangements. For 2025-26 SFA is £16,841m.

3. SFA is the sum of Revenue Support Grant (RSG), worth £3,145 million for 2025-26 and Baseline Funding Level (BFL), worth £13,696 million for 2025-26. The SFA allocations are set out in the Local Government Finance Report and key information and supplementary tables for local authorities.

4. For 2025-26, RSG is the 2024-25 amount increased in line with the change in the ONS Consumer Price Index between September 2023 and September 2024, plus rolled in grants. In 2025-26 the following grants are being rolled into RSG: Election Integrity Programme New Burdens, Extended Rights for Home to School Transport, Island Funding, Tenant Satisfaction Measures and Transparency Code.

5. In 2025-26, BFLs will increase to reflect the increase of the Standard Business Rates Multiplier, accounting for the fact that authorities have different shares of rates yield subject to the small and standard multipliers.

Compensation for under-indexing the business rates multipliers

6. For 2025-26, the amount of compensation against BFLs for under-indexing the business rates multipliers is £2,969 million. This reflects the government’s decision to freeze the Small Business Rates Multiplier for 2025-26 and increase the Standard Business Rates Multiplier in line with the change in the Consumer Price Index between September 2023 and September 2024.

7. The under-indexation grant will increase by a factor that captures the change between the 2024-25 and 2025-26 weighted business rates multipliers. The weighted multipliers reflect each authority’s share of gross rates attributable to small and standard business rates multipliers.

Council Tax

8. For 2025-26, council tax is £38,312 million. It is calculated assuming that i) authorities increase their Band D council tax in line with the maximum allowable level set out by the council tax referendum principles for 2025-26, and ii) each authority’s council tax base increases in line with the average annual growth in their council tax base between 2020-21 and 2024-25.

9. Referendum principles for 2025-26 are a 3% core principle; a 2% adult social care precept; the greater of 3% or £5 cash principle for shire districts; £5 for fire and rescue authorities; 3% for the Greater London Authority; and a cash principle of £14 on Band D bills for the police element of the Greater London Authority.

10. Council tax for 2024-25 has also been revised to reflect data from the council tax levels in England 2024-25 statistical release.

New Homes Bonus

11. For 2025-26, New Homes Bonus (NHB) allocations are provisional but expected to total £290 million.

Local Authority Better Care Grant

12. For 2025-26, the Local Authority Better Care Grant is £2,640 million. It is the combination of the Improved Better Care Fund (£2,140 million) and the Adult Social Care Discharge Fund (£500 million) with the same distributions as 2024-25.

Social Care Grant

13. For 2025-26, the Social Care Grant (SCG) increases by £880 million to £5,924 million, of which £240 million is to equalise the impact of the distribution of the adult social care council tax precept in 2025-26 and the remaining £640 million is distributed using the adult social care relative needs formula. The distribution of the £5,044 million from 2024-25 remains unchanged.

Adult Social Care Market Sustainability and Improvement Fund

14. The amount and distribution of the Adult Social Care Market Sustainability and Improvement Fund remain unchanged at £1,050 million from 2024-25.

Recovery Grant

15. Recovery Grant is a new grant worth £600 million, which targets money towards areas with greater need and demand for services (as proxied by deprivation), and less ability to raise income locally (specifically, council tax).

Children’s Social Care Prevention Grant

16. Children’s Social Care Prevention Grant is a new grant for social care authorities worth £250 million. This will be distributed using an interim children’s relative needs-based formula, which will allocate funding according to estimated need for children’s social care services. The allocations also take into account the varying cost of delivering children and young people’s services and an authority’s relative ability to raise council tax.

17. The government plans to uplift this grant at the final settlement to £263 million.

Domestic Abuse Safe Accommodation Grant

18. Domestic Abuse Duty Safe Accommodation grant is worth £160 million and is consolidated into CSP for the first time. The grant will retain its distribution from 2024-25 but the quantum will increase by £30 million. Core Spending Power for years prior to 2025-26 will be adjusted to include the relevant Domestic Abuse Duty Safe Accommodation allocations.

Funding floor

19. For 2025-26, the funding floor will be £121m and protects all local authorities from a year on year reduction in CSP. The funding floor assumes authorities use the maximum of their council tax flexibilities but excludes any grants rolled into CSP in 2025-26.

Discontinued grants from previous years

20. The full time series of CSP contains other grants that have now either been discontinued, rolled into RSG, or merged into other grants. The details of these other grants can be found in the CSP explanatory notes accompanying previous settlements.