Councils in England are to be handed an extra £600m in funding to tackle the worsening financial crises at town halls across the country, after Tory MPs had threatened Rishi Sunak with a fresh Commons rebellion. Revisiting the funding plans for local government in a highly unusual step, the levelling up secretary, Michael Gove, said he was making an “exceptional provision” to support councils facing soaring costs in adult and child social care. He said the government was making £500m available for social care, alongside a further £100m in other funding guarantees and grants. Taking into account this new funding, Gove told MPs the top-up in the financial package for English councils meant an overall increase in their budgets of up to £4.5bn next year, or 7.5% in cash terms. “Councils have faced cost pressures as a result of high inflation. That is why the prime minister has prioritised halving it,” he said. “The government has also listened to the sector and to the issues raised by members of the house. For this reason, I am today announcing a wide-ranging package of support for local government.” More than 40 Tory MPs – including seven former cabinet ministers – had written to the prime minister to demand more funding to prevent councils in England from making deep cuts to services during an election year. Ministers had last month announced plans for a £64bn package for the 2024-25 financial year, an increase of about £4bn on the amount a year earlier. However, the council leaders and influential backbench Tories had said the settlement was inadequate. While the additional £600m will be welcomed, the extra money still falls short of what town hall leaders say is required. The Local Government Association had argued a figure closer to £1.6bn was required to plug the shortfall in council budgets for the next financial year. Growing numbers of councils across England are warning they face in effect bankruptcy amid soaring costs and rising pressure on services, a financial situation compounded by years of austerity-driven cuts and local missteps. It is understood that Gove had pushed the chancellor, Jeremy Hunt, for a larger increase in the financial settlement of more than £1bn. However, the levelling up secretary’s request was rejected in favour of a smaller amount. The chief executive of one of England’s largest city councils, speaking anonymously, suggested the government could have provided the funding boost at an earlier opportunity. “Why didn’t they include this in the autumn statement. What’s changed? It’ll help but it’s not enough,” they said. Gove said the extra £500m was being made available for councils through the government’s social care grant, which ringfences funding for adult and child services, and full details would be included in the spring budget. He added that although additional financial support was being made available, councils should still invest in areas that helped “place children’s social care services on a sustainable financial footing, while being mindful of the level of adult social care provision”. The County Councils Network said it welcomed the funding deal, but warned “difficult decisions” would still need to be made. Tim Oliver, the Tory leader of Surrey county council and the chair of the group, which represents 37 county and unitary authorities across England, said: “Service reductions will still be necessary for councils in some areas to balance their books, while the majority of councils will still have little choice but to propose maximum council tax rises.”