18 hours ago
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Some of England’s most-deprived councils will receive a funding boost under a new three-year local government deal which prioritises urban areas with high social needs at the expense of affluent places in the leafy south-east.
Manchester, Birmingham, Luton, Bradford, Coventry, Derby and outer London boroughs such as Haringey and Enfield will receive big spending power increases under what ministers have described as a fairer system that will “restore pride and opportunity in left-behind places”.
The housing and communities secretary, Steve Reed, said: “This is a chance to turn the page on a decade of cuts, and for local leaders to invest in getting back what has been lost – to bring back libraries, youth services, clean streets, and community hubs.”
However, the settlement got a lukewarm welcome from some urban councils in the north and Midlands which said it was disappointing that “London’s suburbs” were the “biggest winners” from the review, “leaving many of the most deprived communities facing further cuts after a decade of austerity”.
Leaders of county councils in English home counties and rural areas also criticised the settlement, describing it as unfair because it disproportionately benefited urban ones. The County Councils Network accused ministers of “cherrypicking” – and predicgted it would leave many of its members in financial trouble.
A group of wealthy central London authorities with relatively low council tax bills and high levels of financial reserves – and which are expected to lose out significantly under the new arrangements – will be allowed to set council tax from April above the 4.99% maximum increase.
Some Reform-led councils such as Kent are net gainers under the new “fair funding” distribution formula, but it is unclear whether the boost will be sufficient to enable them to meet their political aspiration of cutting council tax bills.
The 2026-27 local government finance settlement is unlikely to stem the crisis in council budgets, with increasing numbers of struggling town halls this year likely to request special financial help from ministers to balance their books.
The settlement, announced on Wednesday afternoon, gives little detail on how the government will deal with English upper-tier councils’ accumulated deficits on special educational needs services, which are forecast to reach £14bn by 2028.
Six councils with historically low council tax bills will have the option of setting above-maximum rises in April: Wandsworth, Westminster, Kensington and Chelsea, City of London, and the Royal Borough of Windsor and Maidenhead.
The government believes these local authorities will not automatically have to raise council tax rates above the current limit to make up for the loss in grant funding as they have high levels of reserves and can levy second home premiums on wealthy residents.
Several Reform-led council have sought to avoid putting up council tax next April by the full 4.99%. The Kent county council leader, Linden Kemkaran, revealed in a leaked internal video in October this aspiration was “the best thing that we can do to show that Reform can actually run something as big as Kent council”.
She added: “Let’s not forget we are the shop window in Kent county council. People are looking at us, they are judging us every single day, every single minute of every single day. Nigel [Farage, the Reform party leader] knows that. He is super aware that we are the flagship council.”
But at other Reform-led authorities like Durham and Warwickshire, cabinet papers have revealed reduced council tax rises will have to be paid for by millions of pounds of additional cuts to already threadbare council services, and could put the viability of the council at risk.
The settlement follows months of horse-trading between Whitehall and local councils. Initial modelling by the Institute for Fiscal Studies in August showed a number of Labour-run inner London councils would lose about 20% of their grant funding under the new formula.
A subsequent change to the formula that acknowledged the capital’s exceptionally high housing costs and dense concentrations of child poverty significantly reduced London authorities’ exposure to the changes – but this 11th-hour shift has enraged some councils in Labour’s northern heartlands.
“The decision to use housing costs as a key deprivation measure, which leaves London’s suburbs as the biggest winners from this review and many of the most-deprived communities facing further cuts after a decade of austerity, is especially disappointing,” said Sir Stephen Houghton, the chair of the Special Interest Group of Municipal Authorities.
