Autumn Budget 2025: LGA briefing

• Local government is part of the fabric of our country. Councils are the ones who can make a difference. Councils deliver more than 1,300 different statutory duties and responsibilities, including demonstrating value for money. As the most trusted part of the public sector, councils provide strong leadership that ensures the country has safe and thriving communities. 

• Public attention with this year’s Budget will focus on decisions around national taxation. However, while people rightly care about tax levels and the cost of living, they also care deeply about the local services they rely on every day in their communities. 

• Local government is essential to achieving many of the Government’s priorities. Councils work tirelessly to deliver for residents and support national policy goals. However, despite their efforts, local government finances remain under severe pressure with councils facing huge cost pressures in areas including adult social care, temporary accommodation, SEND, and home to school transport. 

• The Government has responded to LGA calls for greater financial certainty and a simpler funding system. Funding has risen in recent years, but we are anxious that the Budget does not provide the level of funding councils urgently need to ensure their financial sustainability, protect services and support local communities. 

• A number of significant policy decisions, such as SEND deficit support, social rent convergence and future asylum accommodation changes, will be subject to further consultation or future announcements. Councils require early clarity so they can plan services and budgets effectively, and the LGA will respond on behalf of its members to each one. 

• New initiatives across health integration, planning, economic crime, digital transformation and employment support will depend on close collaboration with local government. Ensuring councils have a clear role within design and delivery will be critical to achieving intended outcomes. 

• New flexibilities and funding for mayoral authorities, such as integrated settlements, business rates retention zones and growth funds, represent important steps forward. However, areas outside of devolution areas risk falling behind unless there is a clear pathway to gaining access to the opportunities that genuine devolution can provide.  

• The Budget’s new growth measures offer opportunities to support local economic development. Councils act as both democratic leaders and practical enablers of local growth. Their close connection to communities provides detailed understanding of local strengths, challenges, and priorities – insight that is essential for shaping growth that is inclusive and sustainable. 

• The Budget introduces multiple changes across welfare, housing, skills, economic regulation, environmental policy and tax. It will be important that new duties, regulatory requirements and expectations on councils are fully assessed, funded and phased to avoid adding further pressure on already stretched local services. 

• The absence of any reference to adult social care in the Budget represents a missed opportunity to address a widely recognised challenge. People who rely on care and support, as well as those who provide it, will be understandably worried about the sustainability of services given no new funding was announced – despite the pressures across the sector. Adult social care is the glue that helps hold many people’s lives together, supporting them to do the things that matter most to them. Strengthening and investing in this system is an investment in us all, and action is needed now. 

• The OBR forecasts the economy will grow by 1.5% in 2025, revised up from 1.0% in its March forecast. GDP growth is then forecast to slow slightly to 1.4% in 2026, before returning to 1.5% in subsequent years. Average GDP growth across 2026 to 2029 is now expected to be 1.5% compared with 1.6% in the OBR’s March forecast. (Page 20, paragraph 1.32). 

• The OBR has revised down its forecast for medium-term productivity growth, measured as output per hour, by 0.3 percentage points to 1.0% at the end of the OBR’s five-year forecast period. The revision to productivity growth in isolation has lowered tax revenues by around £16 billion in 2029-30 compared to the OBR’s March 2025 forecast. (Page 13, Box 1.A) 

• The OBR expects inflation to have peaked in Q3 2025, and that it will fall progressively to the Bank of England’s 2% target in Q1 2027. (Page 21, paragraph 1.34).

• The government is making further efficiencies and savings in day-to-day spending from 2028-29 onwards, saving £2.8 billion in 2028-29, £4.0 billion in 2029- 30; and £4.9 billion in 2030-31. For 2028-29 this represents 0.5% of departmental budgets set at Spending Review 2025 (SR25) – the NHS and Ministry of Defence will be able to retain and reinvest their savings. Over the three years from 2028-29 to 2030-31, Resource Departmental Expenditure Limit (RDEL) will grow at an average of 0.8% per year in real terms. (Page 104-105, paragraph 4.87).

• The government will legislate to ensure the OBR assesses performance against the fiscal rules once a year at the Budget. The OBR will continue to publish a second five-year forecast in the spring, providing an interim update on the economy and public finances, and to inform the Debt Management Office’s (DMO) financing remit. The government will not normally respond with fiscal policy, unless there is a significant change to the economic outlook that requires a response. (Page 17, paragraph 1.20).

• The government is introducing a High Value Council Tax Surcharge (HVCTS) in England for residential properties worth £2 million or more, from April 2028. This charge will be based on updated valuations to identify properties above the threshold and will be in addition to existing Council Tax. (Page 36, paragraph 2.41).

• Fewer than 1% of properties will be in scope of HVCTS. New charges start at £2,500 per year, rising to £7,500 per year for properties valued above £5 million, and will be levied on property owners rather than occupiers. (Page 36, paragraph 2.41).

• Local authorities will collect this revenue on behalf of central government and will be fully compensated for the additional costs of administering this new tax. Revenue will be used to support funding for local services, with further consideration through the next spending review in 2027. (Page 36-37, paragraph 2.41).

• The government will consult on detailed implementation of the HVCTS in the new year, including to determine who might need additional support to pay the charge and how to deliver it. (Page 37, paragraph 2.41).

• Separate guidance setting out further detail was published by HM Treasury.  

• The government will set out substantial plans for reform of special educational needs provision early in the new year to deliver a sustainable system which – first and foremost – supports children and families effectively. The 2025 Spending Review provided investment for Special Educational Needs and Disabilities (SEND) reform. Future funding implications will be managed within the overall government Departmental Expenditure Limits (DEL) envelope, such that the government would not expect local authorities to need to fund future special educational needs costs from general funds, once the Statutory Override ends at the end of 2027-28. The government will set out further details on its plans to support local authorities with historic and accruing deficits and conditions for accessing such support through the upcoming Local Government Finance Settlement. (Page 105, paragraph 4.94).

LGA view

• Child poverty makes it harder for children to get on in life, and it damages the UK's economy in the long term. The government is therefore taking action to combat child poverty by removing the two child limit on the Child Element in Universal Credit (UC) (Page 31, paragraph 2.16).

• The removal of the two child limit will lift 450,000 children out of poverty, rising to around 550,000 alongside other measures announced this year, such as the expansion of free school meals. These interventions will lead to the largest expected reduction in child poverty over a Parliament since comparable records began. (Page 31, Box 2.A, paragraph 1).

• Poverty imposes significant economic and societal costs. The Child Poverty Action Group estimates the cost to the country at £40 billion per year. Growing up in poverty means that an individual is more likely to end up out of education, employment or training, with children growing up in poorer households earning around 25% less at age 30 than their peers. (Page 31, Box 2.A, paragraph 2).

• This measure is funded by policies in the Budget, including reforming Motability's tax reliefs, clamping down on fraud and error in the tax and benefits systems, and by increasing the number of face to face health assessments. It will help break the cycle of disadvantage and improve life chances for children nationwide. (Page 31, Box 2.A, paragraph 3).

• This measure will support low-income families across the UK. 95,000 children in Scotland and 69,000 in Wales will benefit from this change (Page 31, Box 2.A, paragraph 4).

• From 1 April 2026, business rates bills in England will be updated to reflect changes in property values since the last revaluation in 2023. As a result of the revaluation, the small business multiplier will decrease from 49.9p in 2025-26 to 43.2p in 2026-27, and the standard multiplier will decrease from 55.5p to 48p. A package worth £4.3 billion over the next three years will support businesses as they transition to their new bills. The government will also introduce new permanently lower retail, hospitality and leisure multipliers, to deliver the manifesto commitment to rebalance the business rates system and support the high street. English local authorities will be fully compensated for the loss of income as a result of these business rates measures and will receive new burdens funding for administrative and IT costs. (Page 98, paragraph 4.26).

• To support ratepayers facing large bill increases at the revaluation the government is introducing a redesigned Transitional Relief scheme worth £3.2 billion over the next three years, providing more generous support for those paying higher tax rates. The Transitional Relief caps will be as follows for properties with a rateable value of:

  • Up to £20,000 (£28,000 in London): in 2026-27 – 5%, in 2027-28 – 10% (plus inflation), in 2028-29 – 25% (plus inflation).
  • £20,001 (£28,001 in London) to £100,000: in 2026-27 – 15%, in 2027-28 – 25% (plus inflation), in 2028-29 – 40% (plus inflation).
  • Over £100,000: in 2026-27 – 30%, in 2027-28 – 25% (plus inflation), in 2028-29 – 25% (plus inflation).

  
  Note: These caps are applied before changes in other reliefs and local supplements. (Page 98, paragraph 4.27).

• The government is introducing a 1p supplement to the relevant tax rate for ratepayers who do not receive Transitional Relief or the Supporting Small Business scheme to partially fund Transitional Relief. This will apply for one year from 1 April 2026. (Page 98, paragraph 4.28).

• Bill increases for the smallest businesses losing some or all of their small business rates relief or rural rate relief will be capped at the higher of £800 or the relevant transitional relief caps from 1 April 2026. Note, support is applied before changes in other reliefs and local supplements. (Page 99, paragraph 4.29).

• The government has expanded the 2026 Supporting Small Business scheme to ratepayers losing their retail, hospitality and leisure (RHL) relief. This will apply for three years from 1 April 2026, giving additional support worth £1.3 billion to those losing RHL relief. Note, support is applied before changes in other reliefs and local supplements. (Page 99, paragraph 4.30).

• The government is introducing a one-year extension of the 2023 Supporting Small Business scheme in 2026-27. This support will protect the smallest businesses from overnight bill increases. Note, support is applied before changes in other reliefs and local supplements. (Page 99, paragraph 4.31).

• From 1 April 2026, the government is introducing two permanently lower business rates multipliers for eligible RHL properties with rateable values below £500,000. These rates will be 5p lower than the national multipliers, making the small business RHL multiplier 38.2p in 2026-27 and the standard RHL multiplier 43p in 2026-27. (Page 99, paragraph 4.32). 

• From 1 April 2026, the government is introducing a high-value business rates multiplier for properties with rateable values of £500,000 and above 2.8p above the national standard multiplier, making the high-value multiplier 50.8p in 2026-27. (Page 99, paragraph 4.33).

• At Spring Budget 2024, the government announced that eligible film studios in England will receive a 40% reduction on their gross business rates bills until 2034. The government will continue to provide this relief at the current level to support the creative sector. (Page 99, paragraph 4.34).

• The government is extending the Small Business Rates Relief (SBRR) grace period from one to three years. This means businesses will now remain eligible for SBRR on their first property for three years after expanding into a second property. Businesses expanding after Budget day will be eligible. (Page 99, paragraph 4.35).

• The government is introducing a 10-year 100% business rates relief for EVCPs separately assessed by the Valuation Office Agency and electric vehicle only forecourts to ensure that they face no business rates liability. (Page 120, paragraph 4.236).

• The government is publishing a Call for Evidence at Budget on the role business rates play in investment. It also seeks feedback on the impact of the Receipts and Expenditure valuation method on investment. (Page 99, paragraph 4.36).

• Building on the government’s funding for West Yorkshire Mass Transit, support for the Northern Square Mile, and designation of Leeds South Bank as a promising site for a New Town, the Budget is supporting West Yorkshire Combined Authority by establishing the Leeds City Fund. This is a business rates retention (BRR) zone in Leeds city centre, within which Leeds City Council can retain 100% of business rates growth above an agreed baseline for 25 years. (Page 64, paragraph 3.37).

• In line with the Fair Funding Review, the government is improving the business rates retention system to more consistently support mayors in driving growth. Options being considered include allocating Mayoral Strategic Authorities a direct share of business rates from across their region, building on Local Growth Plans and allowing more tax to be spent where it is raised. Over the coming months, the government will engage with Mayoral Strategic Authorities to co‑develop a new offer, including considering how this could work in place of existing grant. (Page 64, paragraph 3.38).

• To drive growth and give local leaders the tools they need to deliver their vision, the government is developing a business rates retention zone offer with standardised criteria at MSA level. The government has already had early discussions with the mayors of South Yorkshire, the West of England and the North East to explore options for business rates retention zones to support local growth plans, and is open to discussions with other areas. (Page 64, paragraph 3.39).

• The government will extend the 100% business rates retention pilots in Cornwall, the West of England, and Liverpool City Region for a further three years, to 2028-29. This will support local growth by allowing areas to continue retaining the benefits of business growth, while the government develops new retention arrangements for Mayoral Strategic Authorities. (Page 64, paragraph 3.40).

• The maximum amount that can be reimbursed for childcare costs for eligible Universal Credit claimants will increase by £736.06 for each additional child above the current maximum cap for two children. (Page 97, paragraph 4.18).

• The government will reassess Carer’s Allowance overpayments which were the result of incorrect operational guidance, as recommended by the Independent Review into Carer’s Allowance Overpayments. Department for Work and Pensions (DWP) will cancel existing debts or return previously collected debts to affected carers. (Page 97, paragraph 4.15).

• The Budget builds on the government’s approach to long-term, broad-based economic growth, lifting living standards across the country by investing billions in infrastructure, innovation and skills; supporting city regions to be dynamic economic hubs; empowering local leaders to deliver; and reforming how the government works to support them. (Page 67, paragraph 3.32).

• The government is also confirming at least £13 billion of SR25 funding via integrated settlements from 2026-27 to 2029-30 for seven Mayoral Strategic Authorities: Greater Manchester, West Midlands, Liverpool City Region, West Yorkshire, North East, South Yorkshire and the Greater London Authority, representing nearly 40% of people in England. This will empower mayors with local control over a single flexible pot for growth and public services priorities, aligned with their local growth plans. The government remains committed to rolling out integrated settlements to more places at the next Spending Review. (Page 63, paragraph 3.34).

• Alongside this funding, the government will introduce new reforms to simplify the apprenticeship system and make it more efficient as short courses are introduced from April 2026, including removing the additional uplift to levy accounts; changing the expiry window to 12 months; changing the government’s co-investment rate to 75% for levy-paying employers once they have exhausted all their funds; and working with employers to streamline the suite of apprenticeship standards available. More details on the wider Youth Guarantee and Growth and Skills Levy package will be announced shortly. (Page 86, paragraph 3.115).

• The government is also investing £48 million of additional funding to boost capacity in the planning system. This includes additional investment to recruit an extra 350 planners in England by expanding the Pathways to Planning Graduate Scheme and creating a new Planning Careers Hub to retain and retrain mid-career professionals. The government is also funding improvements to the performance and speed of environmental regulators, with extra resources for priority projects and delivery of the Nature Restoration Fund’s Environmental Delivery Plans. This will take the total number of recruitments across the planning system to 1,400 by the end of this Parliament, which will help speed up planning decisions on housing and infrastructure, and support delivery of 1.5 million homes. (Page 60, paragraph 3.25).

• The government is introducing Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, with effect from April 2028. Drivers will pay for their mileage on a per-mile basis alongside their existing Vehicle Excise Duty. Electric cars will pay half the equivalent fuel duty rate for petrol and diesel cars, and plug-in hybrid cars will pay a reduced rate equivalent to half of the electric car rate. The government has published a consultation which provides further detail on how eVED will work and seeks views on its implementation. The consultation will remain open until 18 March 2026. (Page 120, paragraph 4.233).

• The government will uprate Vehicle Excise Duty rates for cars, vans and motorcycles in line with RPI from 1 April 2026. (Page 121, paragraph 4.240).

• Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme from 2 January 2026, except where these are supplied in conjunction with certain other travel services. (Page 117, paragraph 4.202).

• Local roads maintenance funding – By 2029-30, the government will commit over £2 billion annually for local authorities to repair, renew and fix potholes on their roads – doubling funding since coming into office. (Page 104, paragraph 4.78).

• The government will invest £18m over two years in up to 200 playgrounds across England, renewing communities and supporting the government’s commitment to Pride in Place. (Page 105, paragraph 4.93).

• The government will reduce the threshold at which the soft drinks industry levy applies from 5g to 4.5g sugar per 100ml and remove the exemptions for milk-based and milk substitute drinks with added sugar to create a level playing field between pre-packaged beverages. These reforms will be implemented on 1 January 2028, following consultation on the legislation. (Page 114, paragraph 4.176).

• The government is taking action and responding to key industry asks across the hospitality and retail sectors. The government has heard from hospitality businesses that disproportionate licensing conditions can stifle their growth and reduce options for consumers. The government is therefore asking licensing authorities in England and Wales to explicitly consider the need to promote growth and deliver economic benefits in their decisions and setting this out in the first National Licensing Policy Framework, to be published at Budget. (Page 80, paragraph 3.95).

• Licensing sprint – The government will launch the first National Licensing Policy Framework at Budget, which will rebalance the licensing regime and support a modern licensing system. The government is also updating guidance to ensure relevant authorities consider the need to promote economic growth in their licensing decisions. If these changes do not sufficiently improve licensing outcomes, the government will consider making statutory changes. (Page 101, paragraph 4.53).

• The government is going after rogue retailers who breach tobacco and vape regulations, by taking the power in the Tobacco and Vapes Bill to introduce a licensing scheme for retailers to sell tobacco and vape products. This will strengthen enforcement and support legitimate businesses. The government is also legislating to introduce the Vaping Duty Stamps scheme from 1 October 2026, which requires all vaping products manufactured or imported into the UK to have a duty stamp on packaging, so illicit products are immediately identifiable. (Page 83, paragraph 3.103).

• Providing additional funding to enhance Trading Standards capabilities and fund an uplift of at least 45 additional law enforcement officers. This will support further action against organised criminality on our high streets, boosting efforts to protect communities and support legitimate businesses. (Page 82, paragraph 3.100(b) and Page 107, paragraph 4.108).

• The government will make improvements to the packaging Extended Producer Responsibility scheme, including appointing a Producer Responsibility Organisation and consulting on proposals to enhance transparency of local authorities’ use of fees. (Page 101, paragraph 4.55).

• The government will not be proceeding at this time with converging the two rates of Landfill Tax, as consulted on earlier this year. (Page 62, paragraph 3.30).

• Local authority chargepoint capability funding – The government will allocate £100 million to local authorities and public bodies (to support the training and deployment of specialist staff) to accelerate installation of chargepoints where people live and work. (Page 120, paragraph 4.234).

• Cross pavement EV charging: Permitted development rights consultation – Publication of a Department for Transport (DfT) consultation on permitted development rights for EV charging to accelerate the rollout of cross pavement charging solutions and make EV charging easier, cheaper and more accessible across England. (Page 121, paragraph 4.245).

• Taxpayers rightly expect that every penny of public money is spent wisely. The government is therefore taking focused and credible action to deliver a more productive state, including: saving over £250 million to 2030-31 by cutting the cost of politics. This includes abolishing Police and Crime Commissioners and re-organising local government structures, with the potential to reduce the number of councillors in local authorities by around 5,000 to generate savings and streamline accountability in local areas. (Page 48, paragraph 2.71).

• The government is cutting down on wasteful asylum expenditure to ensure that nobody is profiting unfairly from taxpayers’ money. This includes reclaiming £74 million from asylum accommodation suppliers. The government is also reducing the cost of asylum, making the system more efficient, and exiting asylum hotels. (Page 48, Box 2.F).

• As recommended by the OVfM, the Chief Secretary to the Treasury will lead a review of value for money across government spending. This will include reviewing: Homelessness services, to assess funding and delivery models, including ways to improve the supply of good value for money and good quality temporary accommodation and supported housing, such as greater co-ordination and planning in procurement between different parts of the state. (Page 52, paragraph 2.85).

• The government is going further and faster to reform our approach to procurement so that it can shape markets and manage demand. The government is putting in place measures to identify, nurture and protect the UK’s high-growth modern Industrial Strategy sectors like AI, and the foundational sectors that support them, like steel, when procuring from the private sector. (Page 73, paragraph 3.69).

• The government will leverage its procurement budgets to drive innovation. Each department will appoint a senior Procurement Innovation Champion, responsible for defining and delivering its innovation priorities through procurement. To accelerate access for strategically important innovative firms, the government will launch an Innovation Marketplace and establish a task-and-finish group to remove internal barriers to innovative procurement. (Page 74, paragraph 3.75).

• The government will amend Stamp Duty Land Tax rules, so property transferred within Local Government Pension Schemes are subject to an SDLT relief. This will be legislated in Finance Bill 2026-27. (Page 119, paragraph 4.220).

• The Office for the Impact Economy will support departments to partner with social and impact investors, purpose-led businesses, and philanthropists to support growth and help every pound of public funding work harder. The government will identify early opportunities to partner with the impact economy to crowd more capital and support into the Pride in Place Programme, to strengthen and scale activities to give every child the best start in life and diversify the children’s social care placements market. This work builds on the announcement of the £500 million 10-year Better Futures Fund, which the government plans to open for applications next year. (Page 52, paragraph 2.88).