A major shift in council funding will soon reshape budgets across England. According to a new report, the funding rebalance impacts councils unevenly, with inner London boroughs facing the steepest cuts. Meanwhile, outer London and several urban areas outside the capital stand to gain.
The Institute for Fiscal Studies (IFS) reveals that some inner London councils could lose up to 12% of their funding after inflation adjustments. Conversely, cities like Nottingham, Wolverhampton, and Slough will see increases. The government insists the changes address outdated allocation methods that no longer reflect local needs.
Under the new system, funding formulas will better account for service demands and delivery costs. Authorities with more lower-band council tax properties will receive a larger share. Additionally, business rates income, which councils have retained since 2013, will now face redistribution.
The funding rebalance impacts councils differently based on location and economic factors. Camden, Hammersmith and Fulham, and Westminster may lose 11-12% of their budgets. These areas have high-value properties but low council tax rates, making them vulnerable under the revised model.
Outside London, the East Midlands and Yorkshire will benefit the most. Urban districts with moderate population density, such as Blackpool and Crawley, also gain. However, shire districts with strong business rate growth, like Mid Suffolk, will see reductions.
Critics argue the changes merely shift financial strain rather than solving systemic underfunding. The Liberal Democrats accuse the government of “robbing Peter to pay Paul.” Deputy leader Daisy Cooper warns the plan fails to address the root cause of budget shortfalls.
Many councils already struggle with rising costs in adult social care and education. Although recent funding increases helped, leaders say they still fall short. The new system, set to phase in by 2026, aims to correct imbalances but risks sparking disputes ahead of next year’s local elections.
A spokesperson for the local government department insists the reforms are necessary. They argue the current system no longer matches community needs. By redirecting funds, they hope to strengthen public services and support struggling areas.
The funding rebalance impacts councils in complex ways, and final figures remain uncertain until later this year. Yet, one thing is clear: inner London’s loss will be other regions’ gain. As councils brace for change, the debate over fair funding continues.
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