A report from the Institute for Fiscal Studies (IFS) said overall cash for inner London town halls, including Sir Keir Starmer’s own council, Camden, would be 11-12% lower in 2028-29 in real terms.
It said the changes would create big “winners and losers” as ministers attempt to address perceived unfairness in levels of core funding across the country.
The paper said: “Around one in four councils would see real-terms falls in overall funding under the Government’s proposals, with around 30 on the lowest funding floors seeing real-terms cuts of 11–12%. Conversely, another one in four councils would see real-terms increases of 12% or more.”
The Government plans to create a new methodology to assess local authority needs relatively and factor in population and deprivation. It will also assess need for adult and children’s services.
One in 10 will see a fall in overall funding, while one in 10 will see an increase of 10% or more.
Kate Ogden, co-author of the IFS report and a senior research economist with the think tank, said: “England has lacked a rational system of local government funding for at least 12 years – and arguably more like 20. It is therefore welcome that the nettle of funding reform is being grasped, and some councils will benefit substantially under the new system.
The proposals are criticised in the report as “not particularly redistributive to poor, urban areas of England”.
The report added: “It is somewhat surprising that, on average, councils in the most deprived 30% of areas would see very similar changes in overall funding over the next three years to those for councils in the middle 40% of areas.”
London will gain the least, with a cash-terms increase in funding of 8% in the next three years. Analysis by the London Councils collective has highlighted the risk of the funding “dramatically underestimating” needs for local services in parts of the capital.
Outside the capital, the East Midlands (22%) and Yorkshire & the Humber (19%) are set to see the biggest increases in funding, with the South East set to see the smallest at 13%.
A spokesperson for the Ministry of Housing, Communities and Local Government said: “The current, outdated way in which local authorities are funded means the link between funding and need for services has broken down, leaving communities left behind.
“That’s why we are taking decisive action to reform the funding system so we can get councils back on their feet and improve public services, with the IFS recognising that our changes will better align funding with councils’ needs.”
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