Ministers are facing criticism from Labour-run local authorities after it was revealed that impoverished inner-city London councils could lose millions of pounds of funding under a proposed funding restructuring, despite promises to redirect money away from wealthier areas.
Councils in central London, such as Camden, which includes Keir Starmer’s constituency, might experience a funding cut of over 10%, according to the Institute for Fiscal Studies (IFS). This issue affects not only London but also economically struggling northern areas, including South Tyneside and Sunderland, which have high child poverty rates.
The IFS expressed surprise that the government’s proposed funding formula is not more geared towards addressing deprivation, warning that some traditionally disadvantaged areas may lose significant funding. The funding formula review was announced last autumn by the communities secretary, Angela Rayner, who promised a fairer system targeting funds where they are most needed.
Analysis by IFS suggests that the changes to the funding model could lead to major changes for individual councils, with some experiencing substantial gains while others could lose millions. Labour-controlled councils in London, such as Camden and Islington, may face funding reductions of up to 12% over the next three years, potentially due to recent decreases in their reported levels of deprivation.
London Councils criticized the proposals, expressing concern that the changes do not adequately reflect the needs of low-income residents in the capital, where housing costs and homelessness are significant issues. The IFS predicts that about one in four councils could see a real-terms decrease in funding, while a similar proportion might see an increase of 12% or more.
The Ministry of Housing, Communities and Local Government is set to make final decisions on the funding formula changes following discussions and adjustments.
Source: https://www.theguardian.com/society/2025/aug/08/london-councils-to-lose-millions-in-funding-despite-high-poverty-levels
