The government has unveiled a new three-year financial settlement for English councils, promising a fairer distribution of funds but setting the stage for widespread council tax increases this April.
A New Formula for Fairness
Announced on Wednesday, the settlement introduces a new 'Fair Funding' formula for the first time. This system allocates a greater share of overall resources to local authorities with high 'deprivation' scores, measured by factors like income, employment, health, and crime.
This shift aims to direct more support to areas with the greatest need, reversing years of austerity cuts. Councils like Middlesbrough, Manchester, and Birmingham – among England's most deprived – will see some of the biggest boosts in spending power. Outer London boroughs such as Haringey and Newham also benefit significantly.
The Winners, Losers, and Your Rising Bill
While deprived areas gain, the formula creates relative 'losers'. Wealthier councils, including central London boroughs like Kensington and Chelsea and affluent home counties authorities such as Surrey, will receive a smaller relative share of the funding pot.
Despite the reshuffle, the financial pressure on local services remains intense. Consequently, most councils are likely to increase council tax bills in April to the maximum allowable 4.99% for upper-tier authorities with social care duties. The era of widespread council tax freezes is firmly over.
Some authorities, like the Reform-led councils, may try to limit rises, while others such as Windsor and Maidenhead are seeking permission for increases above the cap. Ministers argue this merely brings historically low bills in line with the England average.
A Bigger Crisis or a Turning Point?
Ministers claim the settlement will "turn the page on a decade of cuts," enabling councils to restore services. However, analysts warn the cake is merely being sliced more fairly, not made bigger.
Soaring demand for adult social care, homelessness support, and other critical services means many authorities will continue to struggle. Jonathan Carr-West of the Local Government Information Unit stated the pressing need remains "getting more money into the system."
The settlement's impact on fragile council finances is mixed. It may pull some from the brink but push others closer to crisis. Last year, 30 councils received exceptional financial support (EFS) – effectively loans to fund day-to-day services – to avoid effective bankruptcy. There is speculation that up to 100 councils may apply for EFS in the coming months.
While the new formula represents a significant policy shift towards need-based funding, it does not solve the systemic underfunding plaguing local government. For most households, a higher council tax bill in April will be the immediate and tangible outcome.
