In a significant overhaul of local authority financing, communities across northern England and the Midlands are poised to receive substantial funding increases as the government redirects resources from wealthier rural areas to urban councils hardest hit by years of austerity measures.
Fair Funding Formula Rebalances Council Resources
The new system, described by ministers as creating a fairer distribution model, specifically recognises the greater needs and weaker council tax raising capabilities of councils in what are often termed 'left behind' areas. The changes guarantee real-terms funding increases for these authorities over the next three years, marking a dramatic shift in resource allocation.
Local Government Minister Alison McGovern announced in a parliamentary statement that "people living in the places that suffered most from austerity will finally see their areas turned around." The reforms, scheduled for implementation from April ahead of critical local elections in May, could deliver significant boosts to Reform-led councils in northern regions with high deprivation levels, including Durham and Lancashire, alongside Kent as its flagship council.
Targeted Investment in Post-Industrial Communities
While precise council-by-council impacts remain undisclosed, sources indicate that Kent County Council could receive at least £20 million annually in additional funding, enabling them to achieve their primary political objective of maintaining council tax increases below 5%.
The strategic redirection of resources toward traditional Labour-supporting heartlands in the north forms part of a broader initiative to strengthen civic infrastructure within post-industrial communities. This approach aims to counteract growing voter distrust in politicians, particularly noticeable in areas where electoral allegiance has shifted toward the Conservatives and Reform in recent years.
"This is about providing visible proof that the state can still improve people's lives and keep its promises," McGovern emphasised. "The journey will at times be difficult, but the end result will be a new role of councils as agents of renewal."
Mixed Reactions from Council Networks
Earlier analysis of the government's Fair Funding formula by the Institute for Fiscal Studies had unexpectedly indicated potential losses for some deprived areas including South Tyneside, Sunderland, Gateshead and Wigan. However, subsequent adjustments to the model now position these regions as expected beneficiaries.
Sir Stephen Houghton, chair of the SIGOMA group representing urban councils including Leeds, Liverpool, Manchester and Sheffield, welcomed the modifications. "These reforms mark a significant step towards a fairer and more balanced funding system for councils across the country," he stated.
London's councils, initially concerned about potential billion-pound funding losses, experienced some relief through last-minute changes to deprivation measures that acknowledged the capital's substantial housing needs and concentrated child poverty areas.
Nevertheless, London Councils chair Claire Holland responded cautiously, warning that escalating financial pressures from increasing service demands mean that under the new formula, half of London's 32 boroughs would require government bailouts to avoid effective bankruptcy by 2028.
The County Councils Network voiced strong criticism, describing the new formula as "arbitrary" and accusing ministers of yielding to pressure from urban authorities. The CCN's finance spokesperson Steven Broadbent revealed that "33 of our councils face a real-terms reduction in funding unless they increase their council tax by 5% per annum over the next three years."
Jeremy Newmark, finance spokesperson for the District Councils' Network, expressed concern that "instead of delivering the essential financial reform and fiscal devolution that are needed, the government is merely reallocating an already inadequate funding pot." He cautioned that focusing predominantly on deprivation within major cities could ironically lead to increased deprivation elsewhere.
