Map: Council tax winners and losers after government reveals funding
Councils in England have learned how £78bn of investment will be shared between them as the government announced its new multi-year funding deal.
The plans shifted funding to poorer areas; The Ministry of Housing, Communities and Local Government (MHCLG) says it is an attempt to restore “pride and opportunity in places left behind”.
Outer London boroughs such as Luton, Enfield and Newham will receive the biggest spending increases to 2028/29, followed by cities such as Manchester, Birmingham and Derby.
While most councils will see at least a small cash injection, there are 33 councils that will see a reduction in their spending power. The biggest reduction will be in Harborough in Leicestershire, which will see a 15.8 per cent reduction over the next three years.
According to MHCLG, the end of the multi-year agreement will see councils’ core spending power increase by 23 per cent compared to 2024-25.
Housing minister Steve Reed said: “This is a new chapter on a decade of cuts and a chance for local leaders to invest in building back what has been lost to bring back libraries, youth services, clean streets and community centres.
“Today, we are ensuring every community has the funding it needs to succeed.”
The funding agreement sets out each local government’s core funding allocation, allowing them to set local council tax bills for next April and finalize an overall budget.
How was the new financing decided?
This year’s solution used the new ‘Fair Funding’ formula for the first time, giving greater weight to councils with higher deprivation scores.
England’s poorest areas were revealed in October in key statistics published only every five years. They named Jaywick in Clacton-on-Sea as the poorest neighborhood, followed by several neighborhoods in Blackpool, Middlesbrough, Birmingham and Hartlepool.
Will tax bills now increase?
Regardless of funding allocation, most councils are likely to increase council tax bills by the maximum allowable amount (4.99 per cent for a senior post with social care responsibilities).
However, six councils have been given the power by the government to introduce larger increases to council tax over two years without the need for a referendum by residents.
These are Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, City of London and Windsor and Maidenhead. These are some of the biggest losers from the new funding allocation, but they also have historically low council tax bills.
How did councils react to the announcement?
Some have criticized the new funding model, arguing that it favors London and metropolitan areas over rural areas. The County Councils Network accused ministers of “dodging” the plans “at the expense of entire counties and rural areas”.
Some council leaders said the government should go further in reforming essential services such as special educational needs (SEND) but there was little detail on a solution to the issue. The collective SEND gap of English top-tier councils is predicted to reach £14bn by 2028.
In the face of mounting financial pressures, many councils are struggling to meet the legal duty to remain financially stable, and a growing number are signaling that they will seek emergency financial support (EFS) from the government to avoid effective insolvency.
There were 30 councils that received this support last year and there was speculation that as many as 100 councils could apply for special measures in 2026.
Major Louise Gittins, chair of the Local Government Association, which represents councils, said: “It is good that the government is acting on LGA calls to provide councils with multi-year financial certainty and a streamlined funding system.
“While funding levels have increased over the last few years, setting budgets next year will be an extremely challenging task for many councils. An increase in overall funding is needed to ensure the financial sustainability of councils and our local services.”
