Croydon could actually be among the “winners” of the next review of local authority funding from government, according to a report from the country’s leading independent economics research institute.
On the up?: Croydon could be among the winners under new council funding plans
The Institute for Fiscal Studies report, published today, probably doesn’t tell us anything we did not already know about local authority funding, after 15 years of “austerity” policies imposed from Westminster, with ever-rising levels of Council Tax and several councils, including Croydon, going bust.
The IFS research concludes that English councils need billions of pounds more in funding to meet rising demand, particularly for social care and housing.
The Labour government’s review is almost certainly not going to deliver extra funding across all councils, but it seems likely that under Angela Rayner, as Secretary of State at the Ministry of Housing, Communities and Local Government, it will act to redistribute some of what money is available to where it is most needed.
Which could be where cash-strapped Croydon, at long last, gets some help.
The IFS report says, “From 2026–2027, there will be a new system for allocating funding between councils, which will take account of new official assessments of councils’ spending needs and their relative abilities to raise revenues themselves via Council Tax.
“Changes will be phased in over three years to ease the transition, with funding floors in place to limit losses for those receiving less funding under the new system than currently.
“These reforms are welcome: for arguably 20 years, England has lacked a rational system for allocating funding between councils.
Independent findings: the IFS report was published today
“But after so long without such a system, reintroducing one will mean a significant redistribution of funding around the country. And there are different options for key elements of the system, which could have significant effects on the financial impacts of the final package of reforms.”
Inside Croydon has highlighted the inequalities in council funding many times over the years.
Twelve months ago, our columnist, Andrew Fisher, wrote: “In 2022-2023, government funding to Croydon Council was worth £239.25 per resident. Neighbouring Lambeth gets £481.73 for each of their residents…
“This inequality in funding has been the case for years. If Croydon got the same funding as Lambeth per resident, we’d have an extra £95million to spend every year – more than enough to balance the books.”
Coverage of the IFS report from the Inner London Standard and BBC Inner London, focused on how inner London boroughs, such as Lambeth, Southwark and Wandsworth, will need to increase Council Tax by the maximum allowed. Though it is difficult to recall a time when that was not the case (apart from occasional bouts of generosity from Wandsworth Town Hall).
Detailed findings: the Institute for Fiscal Studies has focused attention on funding inequalities across English councils
The inevitable robbing of inner London Peters to pay outer London Pauls will also see urban areas outside the capital, including Nottingham, Wolverhampton and Slough, get better settlements from central government.
The government argues the overhaul is necessary because councils’ funding has become out of step with local demand for services.
The portion of business rates income that councils have been allowed to keep since 2013 will also be redistributed.
The IFS predicts the proposed changes are set to redistribute around £2.1billion in annual government funding, with 186 authorities losing out and 161 benefiting.
It will not be possible to say exactly what the changes will mean for each area until the plans are finalised later this year.
The share of funding going to the very poorest areas will be substantially larger, it added, than for the least deprived.
A spokesperson for MHCLG 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.”
Across London, the average increase in government funding over three years will be 8%.
For Croydon, it is likely to be 15%.
Given Croydon’s funding has fallen in real terms by more than 20% over the past two decades, such increases in government grants could take 45 years before this council’s grant is back to levels it received at the start of this century.
Read more: Dear Angela: It’s time for you to act and fund Croydon fairly
Read more: Tory Chancellor cuts £45m from Croydon Council’s funding
Read more: Visit the IFS’s own website
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It has been reported that Central Government has confimed that it will provide budgetary assistance to Woking Borough Council. So it does indeed seem that debt restructuring will sensibly be offered to Croydon too. Just a shame we have had the inept Perry/Kerswell Team at the top table since Woking have managed to secure this agreement by having the highest debt in relation to the finances of the Council, not raising Council Tax as high as Croydon by % and further not falling into special measures.
Just because Woking gets a debt write-off does not mean Croydon will, too.
The government is overseeing a reorganisation of Surrey’s councils, from county level down to district councils, which was why there were no local elections in the county in May. That reorganisation – a merger of sorts – cannot go ahead with Woking burdened with its property speculation debt. The other district councils won’t wear it. Hence central government’s “benevolence”. Or pragmatism.
We are unaware of any plans for Mayor Perry to merge Croydon with his Tory chums over in Bromley…
I would await the details of the deal offered to the councils involved there, but a precedent is being set to deal with the accrued debt arising from property speculation. Brick by Brick and the losses involved such as in the acquisition of the Croydon Park Hotel are arising from property speculation.
The government will deny any precedent is created, because there are two dozen other councils (at least) in the queue for bailouts with Croydon.
Woking, and Surrey, they will say, is a “special case”. They can say nothing else.
The saying, ‘Rearranging the deckchairs on the Titanic’, springs to mind.
Croydon has the largest population of all London boroughs, so the volume of services required for Croydon’s population is greater. So as per your article it is immoral that for example Lambeth receives greater funding for less people. There must be a root and branch change in local authority funding.
I suppose whether Croydon gets financial help could depend on what they think the council heads at Croydon will do with it, ie put it to good use or not. From what I understand, previous use of funds does not make this look very likely.
Funding review … what Croydon need is a plan of action and then actually delivering on the plan, start with reorganisation the top team as currebt lot seem incompetent, a leader that delivers is needed abd a new Mayor.
Sensible wages not excessive and award on performance related pay.
We have a town with buildings like Nestlé and parts of the old British Gas building left derelict, street cleaning is needed and more police on the beat. Croydon has good transport links but no venue apart from box park. Clean up the council.develop a plan of action and start delivery of the plan but so far all the talk no action.