Conservative response to Labour’s Fair Funding Review political cash grab

Sir James Cleverly MP, Shadow Local Government Secretary, said:

“This is a nakedly political and partisan cash grab that shifts funding towards Labour's boroughs.

“Labour are punishing councils for keeping council tax low, and moving money to places with higher rates. Inevitably, the areas that lose out will have to cut services or hike bills. And we now know Labour will green light bill increases of more than five per cent without a referendum, trampling local democracy underfoot.

“The so-called Fair Funding Review is nothing of the sort. Only the Conservatives will ensure residents get a fair deal across the country.”

ENDS

Notes to Editors

• Councils which set council taxes below the average will be penalised. The Labour Government has confirmed that it will penalise councils which set below average council taxes (as councils will be assumed to raise £2,060 a year [Band D] in council tax, when allocating government grant). If councils set lower rates, they will have to make up the funding shortfall themselves (MHCLG, Government response to the Fair Funding Review 2.0, 20 November 2025, p. 25, link).

• The Government will assume that councils set their council tax increases at the maximum referendum level. The Labour Government is assuming councils will be levying council tax bills at the maximum of the referendum provisions: ‘The government will continue the existing policy that any protection available through funding floors assumes local authorities use the full council tax flexibility available to them, which will be set out through the Referendums Relating to Council Tax Increases (Principles) Report at the provisional Settlement (MHCLG, Government response to the Fair Funding Review 2.0, 20 November 2025, p. 45, link).

• Councils with low council tax, or which lose out on funding, will be allow to set council tax hikes over 5 per cent without a referendum: The Labour Government says that: ‘We understand that some local authorities may be in a challenging financial position. To strike the right balance between protecting taxpayers and supporting local authorities, the government will consider local requests for council tax flexibility where a local authority is facing significant local financial difficulty and views additional council tax increases as critical to managing financial risk' and ‘will take account of an authorities' tax level in relation to the average council tax levels' (MHCLG, Local government finance policy statement 2026-27 to 2028-29, 20 November 2025, link).

• This is in addition to £700 of council tax hikes already announced: In June 2025's Spending Review, Labour Ministers set out plans to hike council tax every year in this Parliament. Under Labour's proposals for council tax referendum thresholds in England, there is expected to be a 5 per cent yearly rise in council tax in England from 2025-26 to 2028-29. For an average Band D home in England, these annual hikes will increase bills by +£359 a year, taking the annual bill to £2,639 a year – equivalent to £220 a month from families' take-home pay. The cumulative increase will be £707 in extra council tax on a Band D home over that period (Conservative analysis, based on HM Treasury, Spending Review 2025, p.78, 11 June 2025, link).

• Labour's Budget may also impose higher taxes on homes through council tax re-banding or a new homes tax on higher value homes. This would be on top of these increases in council tax.