In a significant development for local government finance, a South West London council has abandoned its threat of legal action against the government following a major revision to proposed funding reforms.
Threat of legal action withdrawn
Richmond Council confirmed it has withdrawn plans for legal proceedings after the Ministry of Housing, Communities and Local Government (MHCLG) published updated proposals for its Fair Funding Review 2.0. The council had previously sent a pre-action letter to Secretary of State Steve Reed, outlining grounds to challenge the consultation process for reforms that would redistribute funding across English local authorities from 2026/27.
The authority had claimed it faced losing up to £45 million annually – representing more than 90% of its current funding – under the original proposals. This would have made Richmond the worst-hit local authority in England by percentage, though the government disputed this figure.
Revised proposals bring relief
The council's change in position comes after analysing a new finance policy statement from MHCLG, which indicates Richmond is now likely to fall into the category of councils receiving a cash-flat settlement over the next three years. This means its core funding would not fall during any transition to the new system.
The updated government approach includes several key protections:
- Introducing changes gradually over three years from April 2026
- Protecting most councils previously facing reductions with a flat cash floor
- Considering limited council tax flexibility
Council leadership responds
Liberal Democrat Council Leader Gareth Roberts welcomed the development, stating: "This announcement shows our concerns have been heard. We have been absolutely clear with government: Richmond needs a fair settlement that protects essential services for the people who rely on them."
"I'm pleased that ministers have listened and that the most severe cuts originally proposed will now not be applied", Roberts added, describing the outcome as "a significant improvement from what was originally on the table."
Jim Millard, the council's finance lead, struck a more cautious note, highlighting that national funding for councils is still falling and local taxation is playing an increasingly important role in filling the gap. "Our focus now is delivering our ambitious transformation programme to protect services and shield residents from steep increases that would otherwise be needed," he said.
The council had been pressing ministers for months to ensure the proposed funding formulae would reflect pressures facing outer London boroughs like Richmond, and that any transition to a new system would be fair and stable.
MHCLG is expected to publish its full response to the consultation on the Fair Funding Review in the coming weeks, providing further details about how the new system will operate across England.
