Analysing The Political Economy

Poorest Councils Have Seen 3 Times The Cuts As Richest

In April last year, research by SIGOMA, the Special Interest Group of Municipal Authorities, revealed that, on average, the top 10 per cent of poorest councils in England have received a 28.3 per cent cut in the last 13 years (2010/11 and 2023/24).

Meanwhile, the top richest 10 per cent of councils have received a 10.1 per cent cut on average during the same period.

This research, although nearly a year out of date goes to show just how local councils are funded, how much central government has cut its budget to them and the effect this is having.

Top 10% Deprived Authorities Real Term Cuts Least 10% Deprived Real Term Cuts
(Most deprived) Blackpool -25.4% Leicestershire -9.2%
Knowsley -30.5% Central Bedfordshire -7.7%
Liverpool -30.3% Bath & North East Somerset -15.2%
Kingston upon Hull -27.9% York -18.2%
Middlesbrough -27.1% South Gloucestershire -10.9%
Manchester -29.9% Oxfordshire -9.4%
Birmingham -29.0% Kingston upon Thames -18.8%
Blackburn with Darwen -30.5% Bracknell Forest -13.7%
Hartlepool -29.7% Surrey -8.3%
Nottingham -28.2% Buckinghamshire Council -9.1%
Sandwell -23.9% West Berkshire -13.3%
Bradford -28.5% Richmond upon Thames -15.9%
Stoke-on-Trent -26.9% Rutland -8.6%
Rochdale -28.4% Windsor and Maidenhead -9.8%
Salford -22.9% (least deprived) Wokingham 2.3%


Drastic Cuts

Government funding represented over 55 per cent per cent of council’s core spending power in 2013-14 but now represents just 37 per cent per cent in 2023-24.

At the same time, the percentage of council funding from local revenue – such as council tax – has increased to over 62 per cent in 2023 as they try to plug the funding gap, an increase of almost 18 per cent since 2013 (when it was 45 per cent of funding).

Government have been inexorably lowering the amount of funding for local government. In 2013-14, they paid some £4.9 billion more in grant than councils handed over in business rates. By 2023 the overall fall in funding meant councils will receive £4.5 billion less than will be raised from business rates, a reversal of some £9.4 billion.

The switch from direct grant to local taxes means the reduction has lower impact on the wealthiest areas, who rely less on grant funding and can raise more from council tax, business rates and other growth-based local funding sources.

Chair of SIGOMA, the Special Interest Group of Municipal Authorities, Cllr Sir Stephen Houghton, said the structures that support a fair distribution of funds raised through taxation have been replaced by ones that tend to reward high value housing stock and a large and thriving business rate base.

This has resulted in increased disparity between the wealthiest areas of England who rely less on grant funding and can raise more from council tax, business rates and other local funding sources.

The business rate retention system was first introduced in April 2013. It allows councils to retain up to half of the revenue raised from business rates in their local area, with the remainder retained centrally by the Government and used to provide grant funding for local authorities. However, retained business rates growth is not counted as a core spending power, and instead allocated on a growth-based formula and not needs-based.

Cllr Sir Stephen Houghton added that the current policy has been a failure and directly hurts council funding pots. Meanwhile, the planned review of the system, originally scheduled for 2020, has now been delayed until 2025 and is directly contributing to further disparity between regions and damaging the plan to help level up the country.

He added: “Failure to reset business rates growth has unfairly disadvantaged the poorest councils over the last three years. The system needs serious reform. Reversing the trends will not happen overnight and we need to introduce a new model that reforms local Government finance to create a fairer funding system.”

“The poorest areas have seen the biggest cuts and for “levelling up” to mean anything the Government should be looking to reverse these cuts and create a funding formula that funding according to council needs.



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