Councils in England must show how they are improving roads and tackling what the government describes as a "pothole plague" or lose out on millions of pounds in funding.
The Department for Transport (DfT) said local authorities' road maintenance pot would be boosted by £500m from mid-April. However, it said English councils must publish annual reports detailing progress on pothole fixing or lose a quarter of that extra funding.
The Local Government Association (LGA), which represents councils, said the government should focus on preventative measures rather than "reactively" fixing potholes. The LGA has estimated that clearing the country's backlog of road repairs would take more than a decade and cost some £17bn to fix.
According to data from the RAC, there are six potholes for every mile of road in England and Wales. All English local authorities will get 75% of the extra cash promised, but if a council does not publish a report on road maintenance, including details on pothole filling progress, the remaining 25% will be withheld. The held back funding will be given instead to councils the DfT believes have made proven progress.
The policy will only apply to English councils as funding for Scottish, Welsh, and Northern Irish local authorities is a devolved matter.
Prime Minister Sir Keir Starmer said broken roads were "not only risking lives but also cost working families, drivers and businesses hundreds - if not thousands of pounds - in avoidable vehicle repairs". He added that councils have the cash to get on with the job.
However, Lucy Nethsingha, leader of Cambridgeshire County Council and chair of the LGA's Liberal Democrat group, told the BBC the amount of money was "nowhere near the amount that is needed". "The implication that we are not spending it well, is not helpful," she said, adding that the government was announcing "stuff that was already announced several times over and that doesn't help increase people's faith in politics". "It's not clear that there is extra money coming as a result of this announcement. There is extra red tape and I don't think that's going to be helpful," she said.
She added in order to fix the roads in Cambridgeshire alone, the council had a shortfall of £410m while the money the government was "re-announcing" for the whole of England was £500m. "Our roads are like a worn out pair of trousers, you can keep fixing the holes, but what you actually need is a new pair of trousers - or in this case a proper resurfacing."
Transport Secretary Heidi Alexander said she was "not pretending that the money we're making available will fill every pothole". Asked whether withholding cash from some councils would just make things worse for drivers in some areas, she said she expected most local authorities would be able to "comply with these requirements".
"We want councils to be open and honest about they are using that money so that the public can go onto their local council's website and see what action is being taken," she said.
Under the government's rules, councils must say how much they are spending, how many potholes have been filled and detail long-term road maintenance plans in reports that have to be published by the end of June. By the end of October, councils must also demonstrate that communities have been consulted on where repairs should take place.
The DfT added that councils who "fail to meet these strict conditions" will see 25% of the funding withheld. During the election campaign, Labour pledged to repair up to a million potholes a year in England.
The LGA said it was in "everyone's interests to ensure that public money is well spent". "This includes the government playing its full part by using the Spending Review to ensure that councils receive sufficient, long-term funding certainty, so they can focus their efforts on much more cost-effective, preventative measures rather than reactively fixing potholes, which is more expensive," it added.
Shadow transport secretary Gareth Bacon described the government's announcement as a "pothole sticking plaster". He said: "Labour like to talk a big game on fixing roads but they are more interested in chasing headlines." The Liberal Democrats transport spokesman Paul Kohler called for a "more sustainable approach" to repairs, saying fixing individual potholes was welcome but did little to address a "crumbling road infrastructure".
