Jayne Bryant MS, Cabinet Secretary for Housing and Local Government
Following the publication of the Welsh Government’s Final Budget 2025-26, I am publishing details of the core funding allocations for local authorities through the final local government revenue and capital settlements for 2025-26.
In preparing the final settlement, I have given careful consideration to the responses I received to the consultation on the provisional settlement, which closed on 24 January. I acknowledge the considerable financial pressures faced by local authorities.
The budget agreement between the Welsh Government and Jane Dodds MS, leader of the Welsh Liberal Democrats, includes an additional £8.24m to secure a funding floor in the settlement at 3.8%.
I want to pay tribute to the incredible amount of hard work and resilience shown across the sector by both officers and elected members over many years to respond to the ongoing challenges councils have been facing. We know that 14 years of cuts cannot be turned around in just one budget and it will take time for the public finances to recover. I am proud the Welsh Government has prioritised local government and other public services in its budget decisions.
Adjusting for transfers, the core revenue funding for local government in 2025-26 will increase by 4.5% on a like-for-like basis compared to 2024-25. No authority will receive less than an 3.8% increase meaning that every authority will see a larger increase than in 2024-2025. In 2025-26, local authorities will receive £6.14bn from the Welsh Government Revenue Support Grant (RSG) and non-domestic rates (NDR) to deliver key services.
A summary table setting out the settlement allocations (Aggregate External Finance (AEF)) by authority is attached to this written statement. The allocations are derived using the formula agreed with local government.
In addition to the core settlement, I am publishing information about specific revenue and capital grants planned for 2025-26, which amount to more than £1.3bn for revenue and more than £1.0bn for capital.
The Programme for Government commitment to reduce the administrative burden on local government continues to deliver the consolidation or de-hypothecation of grants across a wide range of areas. We have transferred £15m of revenue grants into the settlement in 2025-26. It is important that we work with local authority colleagues to understand the impacts of these changes as they are embedded. This is a cornerstone of developing a strategic relationship with local government based on trust and focusing on the outcomes that can be delivered in partnership. This work will continue to ensure the best use of resources for both local authorities and the Welsh Government.
Further details will be sent to all local authorities and published on the Welsh Government Website
As set out in the Draft Budget, we are providing a package of non-domestic rate support which will benefit every ratepayer in Wales. This will cap the increase to the non-domestic rates multiplier for 2025-26 to 1%, at a recurring annual cost to the Welsh budget of £7m. As a result of this cap, the RSG element of the settlement has increased by an equivalent £7m.
Alongside the settlement, we are also investing an additional £78m to provide a sixth successive year of support for retail, leisure, and hospitality businesses. This continued support recognises the economic pressures faced by these businesses and builds on £1bn of support allocated through our specific relief schemes since 2020-21.
The Draft Budget increased general capital funding for local authorities to £200m to recognise the impact of inflation in recent years. As a result of the budget agreement between the Welsh Government and Jane Dodd MS, leader of the Welsh Liberal Democrats, the Final Budget includes an additional £5m for the Low Carbon Heat Grant to increase the support available to local authorities to install low carbon heating systems in their leisure centres making them greener, warmer and more sustainable.
The setting of budgets, and in turn council tax, is the responsibility of each local authority. They will need to take account of the full range of funding sources available to them, as well as the pressures they face, in setting their budgets for the coming year.
I am proud of the working relationship Welsh Government and local government have in Wales and we will continue to engage closely through the Welsh Local Government Association.
The motion for the Senedd to approve the Local Government Finance Report (No.1) for 2025-26 is scheduled for debate on 4 March 2025.