Midlands urban authorities set for funding boost
The leader of Birmingham City Council has described a funding settlement from central government as good news for the city – but leaders of rural councils have been left less impressed.
Town halls up and down the country have now received details of provisional funding allocations for local services for the next three years, the first multi-year settlement for local authorities since 2016.
The government says the new settlement will see budgets increase by £9.8bn for struggling English local authorities to around £78bn by 2029, with Birmingham in line for a large uplift in “core spending power”.
Council core spending power is a government measure that shows how much money a local authority has available to spend on services in a given financial year, combining funding from council tax and business rates receipts alongside the central government grant.
Birmingham City Council’s Labour leader John Cotton described the deal, which will see an uplift of around 45% in spending power for the authority according to the figures, as a “huge boost for the people and communities of Birmingham”.
“It’s great news for our city. After 14 long years of the Conservatives cutting our funding which saw councils up and down the country living hand to mouth, we’re now seeing a Labour government that’s investing hundreds of millions of pounds in our city,” he said.
“This settlement means we can deliver on what’s most important for the people of Birmingham.”
Elsewhere in the Midlands, both Derby and Coventry will see big net gains, with both in line for a 46% increase in their spending power by 2029, while Nottinghamshire will see a 40% bump, according to figures contained in the provisional settlement.
The 2026-27 settlement will also be the first budget distribution for councils using a new “fairer funding formula”, intended to simplify funding allocations by using a needs-based formula.
Minister of State for local government, Alison McGovern said the new formula would directly address poverty by directing funding where it was most needed by “fixing the link between funding and deprivation”.
But leaders of rural councils have criticised the new method, saying it disproportionately benefits urban authorities. Manchester (47%), Birmingham (45%) and Bristol (30%) all saw significant increases in their spending power.
Councils in Herefordshire and Shropshire will see increases of around 10% and just under 14% respectively.
The County Councils Network, which represents around 40 local authorities in England, said much of that increase would come from council tax – warning it was residents who would end up footing the bill for increases in budgets, rather than central government.
“At least 90% of CCN member councils’ much-vaunted increase in total ‘core spending power’ will come from presumed council tax rises of 5%,” said Cllr Steven Broadbent, finance spokesperson for the organisation.
“It is abundantly clear that recent changes to the original government proposals have disproportionately benefitted London and metropolitan boroughs at the expense of all county and rural areas. The continuation of the Recovery Grant and the removal of ‘remoteness’ from almost the whole funding formula will mean hundreds of millions of more funding will be diverted from rural to urban areas over the next three years.
“These last-minute changes, implemented against the available evidence, raises serious questions over whether ministers are unfairly cherry picking which councils benefit from extra funding.”
Six councils, City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, Westminster and Windsor and Maidenhead, will be allowed to raise council tax at higher rates in order to address a “disparity” in the system which has led to householders in historically wealthy urban areas paying lower rates of tax than others.
The Local Government Organisation, which represents councils up and down the country, welcomed the settlement – but warned that local authorities still faced a “hugely challenging task” in budget setting for the next year, in order to balance their books.
Last year alone, 30 local authorities applied to the government for exceptional financial support in an effort to stave off effective bankruptcy.
“We remain concerned by the number of councils having to use unsustainable emergency bailouts which are a clear warning sign about the financial pressures facing local government,” said Cllr Louise Gittins, chair of the LGA.
“Unless sustainable solutions are found to the severe financial challenges facing local government, we anticipate more councils may need exceptional financial support in the future.
“Alongside a significant boost in resources, it is critical that government works with councils to reform key services, such as SEND and adult social care, and undertakes a cross-party review of options to improve the wider local government finance system.”
