The City of London Corporation is exploring a formal challenge to the Government’s Fair Funding settlement, which will see its grant funding slashed, with Deputy Chris Hayward, Policy Chair and de facto political leader, vowing the council will “not rest until we win this one.”
Deputy Hayward has instructed officers to consider an appeal under the Sustainable Communities Act and has written to Prime Minister Andy Burnham raising concerns about the planned cuts. The Corporation is one of several London local authorities due to see reductions in grant funding as the Government redirects resources to councils with the greatest need.
Funding Formula Ignored Daytime Population
Deputy Hayward labelled the reforms an “unfair funding settlement,” noting that the Government’s formula does not account for the Corporation’s daytime population of 676,000 workers and 8,600 residents. He also highlighted that the model ignores services the Corporation delivers for the capital and the rest of the UK, such as its role as Port Health Authority for the Thames.
“We are clear that these services provide immense economic and public value, and are urging Government to reconsider the Fair Funding settlement,” he said. He warned that if an uplift in funding is not delivered, “it will be necessary for us to hand responsibility for those functions back to the government. And may I say if that happens the cost of delivering them will be greatly in the excess of what it will be if they are delivered by the City Corporation.”
Deficit and Transitional Funding
The Corporation’s unaudited statement of accounts for its City Fund for 2025/26, published this summer, revealed a deficit of more than £70m by 2029/30, partly due to the cuts. Some mitigations have been agreed with Government, including three years of transitional funding, and the Corporation is one of several councils to have restrictions on local tax increases removed for 2027/28 and 2028/29.
Deputy Hayward acknowledged the current framework will see the Corporation’s grant funding reduced, sums that its City Fund, or local authority pot, is reliant on. “We are engaging positively with Government and have secured three years of transitional funding,” he said. “However, that only buys us time.”
Legal Challenge and Next Steps
At a Court of Common Council meeting last week, Deputy Jaspreet Hodgson raised the prospect of submitting an appeal under the Sustainable Communities Act, which would require the Corporation to first consult with representatives of interested local people and must concern something within the Government’s power to change. Deputy Hayward confirmed he has asked officers to consider this option, with a response to be delivered “in due course.”
Westminster, Wandsworth and Kensington and Chelsea have also written to Mr Burnham requesting the scheme be reconsidered, threatening legal challenge if not. Following the meeting, Deputy Hodgson told the Local Democracy Reporting Service (LDRS): “Businesses and residents will welcome the Chairman's remarks. If we don't act now, in just six months' time, the City of London could face the highest business rates and largest council tax increases in the country.”
A City of London Corporation spokesperson said: “We welcome the additional funding, which recognises our vital responsibilities on behalf of London and the wider UK. But the settlement is time-limited, so the underlying challenges remain, and crucial services continue to face uncertainty.” The spokesperson added that the Square Mile has a working population comparable to Manchester, and the Corporation’s responsibilities extend far beyond its boundaries, from protecting open spaces such as Epping Forest and Hampstead Heath to supporting cultural institutions including the Barbican Centre.
A spokesperson for the Ministry of Housing, Communities and Local Government (MHCLG) said: “We’re fixing an outdated funding system so funding goes where need is greatest, while protecting councils through the transition and ensuring no area faces a cliff edge. This year, we’re making over £139m available to the City of London to spend on local priorities, and have put bespoke arrangements in place to support the corporation to transition to its new funding position.”
