Northern MPs Condemn 'Skewed' Funding Formula That Benefits London
Northern Members of Parliament have voiced strong criticism against a new government funding allocation system, claiming it unfairly favours London councils at the expense of towns in the north of England. The controversy centres on the revised fair funding formula, which aims to distribute central government money based on local need but has sparked accusations of regional bias.
Housing Costs Weighting Sparks Outrage
The core issue revolves around the government's decision to incorporate a deprivation measure that heavily factors in housing costs. This adjustment has significantly altered the expected distribution of funds, with London and the southeast – regions with the highest housing costs in the country – benefiting disproportionately. One northern MP described the situation bluntly, stating, "It's completely skew-whiffed the figures … we've been absolutely shafted."
Northern MPs argue that while they acknowledge London's housing crisis, deprivation in their constituencies stems from fundamentally different challenges. These include persistently low incomes, limited job opportunities, and inadequate public services. As one MP explained, "London also has better state schools, transport links, job opportunities and cultural opportunities we just don't have." Another framed the issue as one of social justice, highlighting "horrendous" increases in local poverty that they feel are being overlooked by the new formula.
Provisional Settlement Reveals Significant Shifts
The provisional funding settlement announced in December has revealed tangible consequences. Analysis indicates that all authorities within the Liverpool City Region, alongside areas such as Blackpool, Wigan, and Warrington, are receiving less than the national average. This outcome contradicts earlier modelling from the summer, which had projected these northern towns to be among the primary beneficiaries of the overhaul.
Conversely, outer London boroughs like Newham and Brent are now set to receive millions more than initially anticipated. The government defends its approach, stating it has adopted the English Indices of Deprivation 2025 to provide an "accurate and robust" measure. However, SIGOMA, representing councils outside London, found the change precipitated a clear financial shift towards the capital.
Political Pressure and Potential Adjustments
The funding formula represents the first major revision in a decade, with total allocations across England rising from £83.2 billion in 2026/27 to £90.3 billion by 2028/29. While most areas will see an overall increase, northern MPs contend that their regions require substantial, visible investment to counteract years of cuts and address growing political challenges, notably from Reform UK.
One MP warned that the current deal, while better than previous Conservative arrangements, "barely touches the sides" and may not prevent voters from considering alternatives. In response to the backlash, constructive talks have reportedly occurred between Housing and Communities Minister Steve Reed and lobbying figures, including Liverpool Metro Mayor Steve Rotheram.
Discussions have focused on potential mitigations, such as increasing the Recovery Grant – a £600 million fund designed to support councils hardest hit by past cuts. There are calls to boost this grant by £400 million annually to offset perceived losses from the new fair funding formula. Sources involved suggest positive news may be forthcoming, though no official confirmation has been provided.
A government spokesperson stated, "We are repairing local government after years of decline and will shortly set out our consultation response confirming the final Local Government Finance Settlement for 2026-27." The provisional settlement must still be finalised and put to a vote in the House of Commons, where ministers will be keen to avoid rebellion amid a tense political climate.
