Councils in north of England and Midlands to get more funding in shake-up | Local government
Poorer towns and cities in the Midlands and the north of England have been big winners of a change in local government funding that will see cash diverted from affluent rural areas to urban councils hardest hit by austerity.
Ministers said the changes introduced a fairer system that recognized extra needs and weakened councils’ powers to raise council tax in so-called “left behind” areas. It guarantees them real term fund increases for the next three years.
Local government minister Alison McGovern said: “People living in places most harmed by austerity will eventually see their areas turn around.” parliament declaration.
changesThe new plan, which will be introduced from April ahead of crucial local elections in May, could see funding increases for Reform-led councils in the north such as Durham and Lancashire, as well as high-deprivation councils in Reform’s flagship council, Kent.
Although the exact impact on a council basis is not yet available, sources suggest that a funding increase of at least £20 million per year for Kent borough council would enable the council to meet its key political priority of setting council tax rises below 5%.
The extra resources being directed to once-Labour-supporting strongholds in the north are seen as part of a bid to strengthen civic infrastructure in post-industrial societies. The hope is to reverse the trend of growing distrust of politicians among voters who have frequently switched their electoral allegiances to Conservatives and Reform in recent years.
McGovern said: “This is about providing visible evidence that the state can still improve people’s lives and deliver on its promises. The journey will be difficult at times, but the end result will be a new role for councils as agents of regeneration.”
Analysis of an earlier model of the government’s Fair Funding formula, carried out by the Institute for Fiscal Studies in the summer, unexpectedly found that some deprived areas such as south Tyneside, Sunderland, Gateshead and Wigan stood to lose out, but after further adjustments these areas were now expected to be beneficiaries.
Stephen Houghton, chief executive of the Sigoma group of city councils, which includes Leeds, Liverpool, Manchester and Sheffield, welcomed the changes. “These reforms are an important step towards a fairer and more balanced funding system for councils across the country,” he said.
The deal is not as bad as feared for London councils, which at one point worried they could lose billions of dollars in funding. An 11th-hour change to deprivation measures, which took into account the capital’s high levels of housing need and areas where child poverty is concentrated, has somewhat mitigated the impact.
Responding coolly to the announcement, London Councils Chief Executive Claire Holland warned that mounting financial pressures caused by the growing need for services meant half of the capital’s 32 boroughs would need government bailouts to avoid falling into insolvency by 2028, under the new formula.
The County Councils Network (CCN) criticized the changes, saying many of its members in rural areas stood to lose “significantly”. He described the new formula as “arbitrary” and accused ministers of bowing to pressure from city councils.
“Our analysis has shown that county and rural taxpayers are already set to foot the bill for reforms unless they increase council taxes by 5% annually over the next three years; 33 of our councils face a real-term reduction in funding unless they increase council taxes by 5% annually,” CCN finance spokesman Steven Broadbent said.
Jeremy Newmark, finance spokesman for the District Councils Network, said: “Instead of delivering the necessary fiscal reform and financial devolution, the government is reallocating an already inadequate funding pot.
“Whilst it is of course legitimate for ministers to use areas of deprivation as a factor in determining services, it would be ironic, unfortunate and counterproductive if this led to increased deprivation outside major cities.”
