Inner London is set to be the biggest loser ‘by far’ from the Government’s proposed Fair Funding reforms, a study by the Institute for Fiscal Studies has calculated.

A new report by financial experts at the think tank found that the proposed reforms to the local government funding system would create big ‘winners’ and ‘losers’.

Fairer Funding for London?

Camden, Hammersmith & Fulham, Kensington & Chelsea, Wandsworth and Westminster will be hit the hardest and can expect their overall funding to be 11–12% lower in real terms in 2028–29 than this year, according to the IFS.

Outer London will do much better with several boroughs, such as Enfield, Havering and Hillingdon, being among the biggest beneficiaries of the reforms. They could see overall funding increase by around 20% in real terms over the next three years.

Impact of Funding Reforms Outside of London

Outside the capital, councils in the East Midlands are likely to see the biggest real-terms increases in overall funding over the next three years (15% in real terms), followed by Yorkshire & the Humber (12%).

Local authorities in the South East are set to see the smallest real-terms increases (7%), on average.

Fair Funding for Deprived Areas?

The IFS’ research also found that increases in funding for councils covering the most deprived 30% of areas are set to be similar over the next three years, on average, to those in the middle 40% of areas.

In contrast, rural areas, which feared losing from the reforms, may fare better than expected. The average change in funding for the least densely populated 10% of council areas is set to be in line with the national average over the next three years.

Commentary

Kate Ogden, a senior research economist at IFS and an author of the report, said England had lacked a ‘rational system of local government funding’ for up to two decades and so the proposed reforms were ‘welcome’.

‘But the changes will sting for those councils that are assessed to currently receive too high a share of the overall funding pot, and so which lose out from moves to align funding with assessed spending needs,’ she added.

For more on Fair Funding check out the following by The MJ (£): Fears fair funding could trigger section 114 notices