1 week ago
30
Deprived towns and cities in the Midlands and the north of England are the big winners in a shake-up of local authority funding that will redirect cash from affluent rural areas to urban councils hit hardest by austerity.
Ministers said the changes put in place a fairer system that recognised the extra needs and weaker council tax-raising powers of councils in so-called “left behind” areas. It guarantees them real-terms funding increases for the next three years.
“People living in the places that suffered most from austerity will finally see their areas turned around,” the local government minister, Alison McGovern, said in a parliamentary statement.
The changes, which will be introduced from April, before critical local elections in May, could see funding boosts for Reform-led councils in the north with high levels of deprivation, such as Durham and Lancashire, as well as in Kent, Reform’s flagship council.
Although the precise council-by-council impact is not yet available, sources suggest a funding boost of at least £20m a year for Kent county council would allow it to meet its main political priority of setting a council tax increase lower than 5%.
The extra resources directed to once solid Labour-supporting heartlands in the north are seen as part of an aim to boost civic infrastructure in post-industrial communities. The hope is to reverse a trend of growing distrust in politicians among voters who have often switched their electoral allegiances to the Conservatives and Reform in recent years.
McGovern said: “This is about providing visible proof that the state can still improve people’s lives and keep its promises. The journey will at times be difficult, but the end result will be a new role of councils as agents of renewal.”
Analysis of an earlier model of the government’s Fair Funding formula carried out by the Institute for Fiscal Studies in the summer unexpectedly found some deprived areas such as south Tyneside, Sunderland, Gateshead and Wigan were set to lose out, but after further tweaks those areas are now expected to be beneficiaries.
Stephen Houghton, the chair of the Sigoma group of urban councils including Leeds, Liverpool, Manchester and Sheffield, welcomed the changes. “These reforms mark a significant step towards a fairer and more balanced funding system for councils across the country,” he said.
The settlement is not as bad as feared for London’s councils, who at one stage were concerned they might lose billions in funding. An 11th-hour change in deprivation measures, which recognised the capital’s high levels of housing need and areas of concentrated child poverty, mitigated the impact to some extent.
Responding cooly to the announcement, the chair of London Councils, Claire Holland, warned that spiralling financial pressures caused by rising need for services meant that under the new formula half of the capital’s 32 boroughs would need government bailouts to avoid in effect going into bankruptcy by 2028.
The County Councils Network (CCN) criticised the changes, saying many of its members in rural areas were set to lose out “substantially”. It called the new formula “arbitrary” and accused ministers of caving in to pressure from urban councils.
“Our analysis has shown that county and rural taxpayers are already set to foot the bill for the reforms, with 33 of our councils facing a real-terms reduction in funding unless they increase their council tax by 5% per annum over the next three years,” said the CCN’s finance spokesperson, Steven Broadbent.
Jeremy Newmark, the finance spokesperson for the District Councils’ Network, said: “Instead of delivering the essential financial reform and fiscal devolution that are needed, the government is merely reallocating an already inadequate funding pot.
“While it is of course legitimate for ministers to use areas’ deprivation as a factor in determining services, it would be ironic, unfortunate and counterproductive if this led to an increase in deprivation outside of the biggest cities.”
