Councils can expect an “above inflation” settlement this year, a senior civil servant revealed yesterday.

Nico Heslop, director of local government finance at the Department for Levelling Up, Housing & Communities, told the Commons levelling up, housing and communities committee that councils are a funding priority.

MPs were questioning the new local government minister Simon Hoare and Mr Heslop about the funding gap facing councils, which the Local Government Association estimates to be £4bn over two years.

Mr Heslop highlighted the cyclical nature of the annual budget setting process. He said: “We always have budget gaps, that’s not in any way to not take seriously the very real pressures facing local government, but we are at the stage of maximum gap.”

Attempting to offer some reassurance ahead of the local government finance settlement, which is set to be published before Christmas, Mr Heslop said it was likely the settlement would be higher than inflation.

“If you think about where inflation is today, as long as it roughly tracks the path it is on at the moment I would expect that the settlement will deliver an above inflation increase in spending,” Mr Heslop said.

Inflation is currently around 4%. Last year’s settlement, which provided a 9% core funding increase on average, came when inflation was around 10%.