Autumn Statement and Local Government Funding

The Autumn Statement sets out the government’s spending plans and departmental budgets for 2022/23. This briefing provides an overview of the funding announcements and London Councils’ initial response to them.

  • By Paul Honeyben


The Chancellor of the Exchequer, Jeremy Hunt, delivered his first Autumn Statement on 17th November 2022. As well as the usual updates on the state of public finances and the performance of the economy (in the context of challenging global conditions), the Chancellor also set out the broad policy direction in three key areas: economic stability, economic growth and public services. The key policy announcements relating to public spending and local government are summarised below:

Key Headlines

  • The Council tax referendum limit will rise from 2% to 3% in 2023-24, with the adult social care precept flexibility rising from 1% to 2%. This could generate an extra £80m for London boroughs.
  • Adult Social Care funding reforms will be pushed back by two years to October 2025.
  • The funding to deliver ASC reforms will be repurposed, with £1.3bn in 2023-24 and £1.9bn in 2024-25 distributed to local authorities through the Social Care Grant.
  • An extra £1bn go towards social care via the Better Care Fund (£600m) and through a ringfenced ASC grant (£400m) in 2023-24, rising to £1.7bn in 2024-25.
  • The business rates multiplier will be frozen in 2023-24 and local authorities will be fully compensated for any loss of income as a result of the 2023 revaluation.
  • Social rents will be capped at 7% (costing London boroughs an estimated over £100m).
  • The £1bn Household Support fund will be continued for another 12 months from April 2023.
  • The NHS budget will increase by £3.3bn in each of next 2 years above the SR21 level.
  • The Schools budget will increase by £2.3bn in each of next 2 years above the SR21 level.
  • The Energy Price Guarantee for households will rise to £3,000 from April 2023 from the current £2,500.
  • It is unclear whether the Energy Bill Relief Scheme will continue for public sector bodies.
  • State pensions, benefits and tax credits will rise in line with inflation (10.1%) from April 2023.
  • Local Housing Allowance rates will remain frozen in cash terms at the current levels.
  • A new ambition has been set out to reduce energy consumption from buildings and industry by 15% by 2030, with £6bn of new funding set out from 2025 to achieve this goal.

Economic & Fiscal Outlook

  • The OBR forecast expects the economy to enter a recession lasting just over a year from the third quarter of 2022, with a peak-to-trough fall in GDP of 2%. GDP is expected to fall by 1.4% in 2023.
  • Unemployment is set to rise by 505,000 from 3.5% to peak at 4.9% in the Q3 2024.
  • CPI inflation is set to peak at a 40-year high of 11% in the current quarter before dropping sharply next year.
  • Rising energy, food, and other goods prices have pushed up interest rates to levels not seen since the 2008 financial crisis.
  • The medium-term fiscal outlook has materially worsened since the OBR’s March forecast due to a weaker economy, higher interest rates, and higher inflation.
  • Borrowing is set to fall by £37bn next year to £140.0bn (5.5% of GDP) due to previously announced tax rises and scaled-back fiscal support and continues falling to £69.2bn (2.4% of GDP) in 2027-28.

Table 1 – Key Economic & Fiscal Indicators













Percentage change on a year earlier, unless otherwise stated

Gross domestic product (GDP)
















Employment (million)








LFS unemployment (%)








Public sector net borrowing (% GDP)








Public sector net borrowing (£Bb)








Public sector net debt (% GDP – Excl. Bank of Eng.)








Public sector net debt (£Bn)








Source: Office for Budget Responsibility - Economic & Fiscal Outlook, November 2022, Tables TA1 and TA5

Public Spending

  • The Autumn Statement updated the overall envelope for public spending to 2027-28.
  • Total Managed Expenditure will decrease from 44.7% of GDP in 2021-22 to 43.4% of GDP in 2027-28. Resource Annually Managed Expenditure is forecast to rise by 33.8% from £461.7bn in 2021-22 to £617.6bn in 2027-28.
  • Resource Departmental Expenditure Limits will increase by 8.5% from £451.8bn to £490.1bn over the same period.
  • Total departmental spending (resource and capital) will increase to £562bn by 2024-25, an increase of 3.2% from current levels

Key Announcements


Council Tax

  • The core referendum limit for increases in council tax will increase from 2% to 3% per year from April 2023.
  • The adult social care precept flexibility will increase from 1% to 2% per year from April 2023.
  • The increase in thresholds could generate an additional £80m across London boroughs in 2023-24.

Business Rates

  • The Business Rates Revaluation will take effect from 1st April 2023 as planned. Local Authorities will be fully compensated for any loss of income from the revaluation and will receive new burdens funding for administrative and IT costs.
  • The business rates multipliers will be frozen in 2023-24. DLUHC officials have confirmed local authorities will receive c.£1bn compensation for the freeze (rather than indexation to CPI inflation).
  • A package of targeted support worth £13.6bn over the next five years will support businesses as they transition to their new bills.

Cost of Living

  • The Energy Price Guarantee will rise to £3,000 in April 2023 from the current £2,500. The Energy Bill Relief Scheme for businesses will be reviewed by HMT to determine support for non-domestic energy consumers beyond March 2023. It is not clear what will happen regarding support for public sector organisations and local authorities.
  • The National Living Wage will increase from £9.50 to £10.42 for individuals aged over 23, and state pensions, benefits and tax credits will rise in line with inflation.
  • The £1bn Household Support Fund will continue for a further 12 months to March 2024. An additional Cost of Living Payment will be provided to households on means-tested benefits, pensioner households, and individuals on disability benefits.

Health & Social Care

  • The implementation of Adult Social Care funding reforms will be pushed back by a further two years to October 2025.
  • To support adult social care, a total of up to £2.8bn in 2023-24 and £4.7bn in 2024-25 will be made available. This includes:
  • Social Care Grant - £1.3bn (2023-24) and £1.9bn (2024-25) – repurposing the money earmarked for ASC funding reform
  • Better Care Fund/iBCF - £600m (2023-24) and £1bn (2024-25) to support timely hospital discharges
  • Adult Social Care Grant – £400m (2023-24) and £680m (2024-25) allocated to local authorities through a ringfenced adult social care grant, which also help to support discharge
  • Additional funding through the rises in council tax referendum cap and the ASC precept (mentioned above).


  • Social housing rent rises will be capped at a maximum of 7% instead of CPI + 1% in 2023-24 (costing London boroughs over £100m).
  • This policy applies to Registered Providers (including Local Authorities and Housing Associations), however, Supported Housing provided by Registered Providers will be exempt.


  • For the next two years, schools in England will receive an additional £2.3bn of funding – taking the core schools budget to £58.8bn by 2025. This will restore per pupil funding in real terms to 2010 levels, as promised in the 2021 Spending Review.
  • The government will not impose VAT on independent schools, citing the move could be detrimental for around 90,000 students.

Transport & Environment

  • Electric vehicles will no longer be exempt from vehicle excise duty from April 2025.
  • The Government confirmed it remains committed to reducing emissions by 68% by 2030 as agreed at COP26.
  • A new ambition has been set out to reduce energy consumption from buildings and industry by 15% by 2030: A further £6bn of new funding will be set out from 2025 to achieve this goal. (Details TBC)
  • The Business and Energy Secretary will publish further details on the Government’s energy independence plans and launch a new Energy Efficiency Taskforce shortly.

Business & Innovation

  • The existing Investment Zones programme is being reconsidered and previously submitted applications will no longer move forward.
  • Research and development tax reliefs will be modified from April 2023.
  • For two years, tariffs will be removed on over 100 goods to reduce business production costs.
  • The National Insurance Secondary Threshold for employers is fixed at £9,100 until April 2028.

Infrastructure Investment

  • Total departmental capital spending in 2024-25 will be maintained in cash terms until 2027-28, delivering £600bn of investment over the next 5 years.
  • At least £1.7bn will be allocated to priority local infrastructure projects through the second round of the Levelling Up Fund. Successful bids will be announced before the end of the year.

General Taxation

  • The Energy Profits Levy, an additional tax which reflects the extraordinary global context of high oil and gas prices, will increase from 25% to 35% and generate an additional £19bn through 2027-28.
  • A new, temporary 45% Electricity Generator Levy will be applied on the returns being made by electricity generators and yield an additional £14bn through 2027-28.
  • The government will implement the OECD Pillar 2 rules to apply a global minimum corporate tax rate of 15%, for accounting periods beginning on or after 31st December 2023.
  • The point at which the highest earners start paying the top rate of income tax will be lowered from £150,000 to £125,140.


  • Mayoral devolution deals have been agreed with Suffolk County Council and advanced discussions are continuing in Cornwall, Norfolk and the North East of England. Taken together, these deals would increase the proportion of people living under a directly elected mayor with devolved powers in England to over 50%.
  • Current negotiations with combined authorities in Greater Manchester and West Midlands will explore the potential for single departmental-style finance settlements and move away from competitive bidding with more local control over economic growth funds.



Significant inflationary pressures have done much to reduce the comparative generosity of last year’s Spending Review. Prior to the Autumn Statement, London boroughs were facing a funding gap of £2.4bn over the next four years. This included an immediate £700m shortfall next year and provided the toughest financial outlook they’ve faced since 2010.

As such, the overall increase in resources available to local government announced in the Autumn Statement was very welcome. While funding for most departments has been left at the previous levels set out in the Spending Review - or even cut slightly - local government was one of the only departments (alongside health, schools and work and pensions) to see substantial increases. This is an encouraging sign that central government has listened to London Councils and the sector.

However, imposing greater council tax rises during a period when residents are facing such relentless cost of living pressures will be a hugely difficult decision for boroughs. If all boroughs chose to utilise the additional council tax flexibilities it would generate an additional £80m next year.

Action to alleviate the intense and unprecedented pressure on adult social care was a major priority for London Councils. The direct additional funding for this vital service and associated increases for the NHS was therefore extremely welcome.

The new ring-fenced funding for adult social care discharge funding, worth £400m in 2023-24, and £600m that will be channelled through the Better Care Fund and Improved Better Care Fund will provide a much-needed easing of the unsustainable pressures on the health and care system.

Despite the desperate need to reform ASC funding, the scale and complexity of the reforms and wider pressures in the system mean the delay in implementation of the reforms is on balance a good decision, and indeed London Councils had called for this. Repurposing the funding (£1.3bn in 2023-24 and £1.9bn in 2024-25) that had been earmarked to deliver the reforms through the Social Care Grant will help address wider pressures in both adult and children’s social care.

In the past, London boroughs receive around 16% of all these social care grants - so we estimate they may expect to receive over £300m of this additional funding next year.

There was also some good news relating to business rates. The transitional relief scheme will insulate businesses from large bill increases after the 2023 business rates Revaluation and will provide welcome support for London’s businesses alongside the broader freeze in business rates.

One of London Councils’ key lobbying priorities ahead of the Statement was certainty over business rates funding. Confirmation that the Government will compensate local government for the funding increase it would have received had rates risen by CPI inflation is therefore very welcome. This is estimated to be worth an additional £1bn for local authorities - of which London boroughs may expect to receive around £180m.

There was very little in the Statement on housing delivery and support for homelessness. However, the 7% social rents cap will provide vital help to social tenants with rising living costs. It comes at a cost though: independent modelling commissioned by London Councils suggested this would leave London boroughs with a £100m shortfall in their Housing Revenue Account budgets for next year. This means less money for maintenance, building safety and retrofit programmes. It could hit those boroughs with large HRAs particularly hard.

The various measures set out to support with the cost of living – uprating benefits, protecting pensions, continuing that Household Support Grant and the continuation of the Energy Price Cap - will provide support for the most vulnerable Londoners. But, as the IFS points out, real household disposable income is set to fall by 7% over next 2 years, and so demand for local authority services from the most vulnerable residents is set to continue.

Looking further ahead, the government reiterated its commitment to the Glasgow Climate Pact agreed at COP26 and the target of a 68% reduction in our emissions by 2030, but failed to address the concerns voiced by the Climate Change Committee and others regarding the lack of clear delivery plans. The government’s announcement of a new energy efficiency drive and associated funding worth £6 billion for 2025-28 is welcome, but a fraction of what is required to meet London’s climate objectives.

All told, the funding announcements set out in the Autumn Statement could help to reduce the overall funding gap considerably for 2023/24. However, the details won’t be confirmed until the Provisional Local Government Finance Settlement in December. Despite the welcome funding increases, boroughs will still face some very tough decisions, as demand on services will continue to be high due to inflation and cost of living pressures.

Moreover, the government has again opted for short-term sticking plasters to plug gaps rather than deliver any long-term solutions - particularly with regard to social care. Further council tax increases risk heaping more of the funding burden on a tax that is long overdue reform, and business rates is once again being propped up by freezing rates and ever more reliefs. While these funding interventions may help boroughs get through the current crisis – these stop-gap funding solutions show central govt reverting to type and thinking both top-down and short-term.

Looking beyond this parliament, serious policy debate and consideration is required to ensure local government can be funded in a sustainable way over the longer term. There may be a chink of light in the devolution trail blazers where there is a commitment to “exploring the potential for single departmental-style finance settlements”, which echoes a commitment in the Levelling up Missions to be delivered by 2030.

London Councils will continue to lobby for adequate resources for London local government and seek a better balance of funding and a broader range of revenue raising powers, to ensure they can continue to deliver vital local services to Londoners.




Paul Honeyben, Strategy Director: Local Government Finance and Improvement