New Fair Funding Formula Alters Council Budgets and Raises Tax Concerns in England
England's local government finance settlement for the coming three years introduces a new Fair Funding formula that places greater weight on deprivation in distributing core funding.
This adjustment benefits areas with higher deprivation rankings, including Middlesbrough, Manchester, Birmingham, and the Outer London boroughs of Haringey and Newham. Conversely, wealthier areas such as Kensington and Chelsea and Surrey are among the losers under the new allocation.
Ministers have described the change as a reversal of austerity-driven cuts, aiming to direct a larger share of resources to communities with greater need. However, some northern councils and rural authorities question the fairness of the distribution.
In April, most councils are expected to raise council tax, adhering to a 4.99% cap for upper-tier authorities responsible for social care. Notably, Windsor and Maidenhead may exceed this limit.
While ministers argue that the settlement could help restore local services, critics caution that it will not fully compensate for years of budget reductions coupled with rising demand.
Additionally, many councils may require Exceptional Financial Support (EFS) to prevent bankruptcy. Last year, 30 councils accessed EFS, and there is speculation that up to 100 may apply in the near future.
The settlement sets core funding allocations for the next fiscal year and informs budget finalisation. However, it does not guarantee an overall increase in budgets, focusing instead on directing more funds to areas in need.
