Multiple-year settlements for councils in England and an end to the postcode lottery that has been local authority funding from Whitehall, as £78bn is allocated in effort to ‘end deprivation’. By STEVEN DOWNES
‘At last!:’ Labour candidate Rowenna Davis’s version of #FundCroydonFairly has helped nudge government into a better settlement
Croydon Council will receive an extra £40million each year for the next three years in its annual grant from central government it was announced today.
The news was made in a parliamentary statement in the House of Commons just before 3pm by Alison McGovern, the Minister of State for local government.
The confirmation was greeted with a jubilant “At last!” from Rowenna Davis, Labour’s candidate for Croydon Mayor next May.
Today’s announcement means a 28% increase in Croydon Council’s funding from central government. The extra £40million in 2026-2027 is more than double the additional money that Croydon’s number-crunchers had anticipated when conducting preliminary budget work just last month.
“This decision reverses decades of neglect, in which Croydon received half as much as some inner London boroughs, meaning less money for services to residents, impacting everything from street cleaning to care for the elderly,” Davis said in response to the funding settlement.
The fairer funding for Croydon won’t alone “fix the finances”: Croydon is this financial year spending £70million just to meet its debt repayments and interest, and the council has already said that it will need another bail-out from central government in 2026-2027 just to balance the books.
Missing measures: Green candidate Peter Underwood says more could be done
Indeed, as Peter Underwood, Croydon Greens’ candidate for Mayor, told Inside Croydon, “Increasing overall funding and better targeting for areas in most need are both steps in the right direction.
“But there is no mention of dealing with historic debts or changing the unfair Council Tax system, and councils will still be forced into above-inflation tax rises in coming years.
“This means that Croydon residents will still be left paying for past mistakes by local and national politicians.”
The government’s announcement does represent a move in the right direction in other ways, too, as for the first time in more than a decade the government has also shifted to multiple-year settlements for local authorities, instead of the annual anxiety and uncertainties over the budget-setting process that councils have had to face until now.
Croydon’s Tory Mayor, Jason Perry, and his new council finance director, Conrad Hall, will now have draft allocations from government for financial years 2026-2027, 2027-2028 and 2028-2029, when they work on the next council budget, which will need to be approved by full council in late February.
Croydon’s new deal is part of £78billion being made available to councils across England in what the government has declared to be “a radical overhaul of how local government is funded”.
New deal: Croydon MP Steve Reed has finished off the local authority funding work started by his ministerial predecessor Angela Rayner
Labour Party sources said: “Councils will have more resources available to bring back libraries, youth services and clean streets.”
By the end of this three-year settlement, councils in England on average will see an increase of 23% in their core spending power compared to 2024-2025.
The government calls it “a turning point for the way local government is funded”, which seeks to end the postcode lottery that has seen some councils go bankrupt while other authorities have been able to maintain services and still build up their reserves of cash.
“Places are now being funded using an evidence-based system that properly recognises local circumstances and the true costs of providing services in deprived communities,” according to a government source.
Politicians of all parties in Croydon have long recognised disparities in the way this borough was disadvantaged in comparison to some of its London neighbours.
Much of the work on the new settlement had been undertaken by Reed’s ministerial predecessor, Angela Rayner, in the first 12 months of the Labour government. Today, Reed said: “This is a chance to turn the page on a decade of cuts, and for local leaders to invest in getting back what has been lost.
“Today we’re making sure every community has the funding they need to succeed.”
McGovern said, “Deprivation doesn’t happen by accident – it’s the result of years of broken systems and wrong priorities. This settlement tackles that head-on by directing funding where it’s needed most.
“By fixing the link between funding and deprivation, we’re giving local areas the tools to create opportunities, support families and rebuild the services that hold communities together.”
The settlement money is in addition to a £600million Recovery Grant which was introduced last year and which government says will continue throughout the three-year settlement, “targeted at areas hit hardest by years of underfunding”.
And the government added: “All councils must still manage their budgets responsibly, and Council Tax rises will be capped… It will be entirely up to local leaders to raise Council Tax.”
Reed, who has been MP for Croydon North since 2012, named Rowenna Davis in his comments about the new deal for Croydon. “Rowenna has brought the voices of Croydon to Westminster and we’ve listened,” Reed said.
Davis’s campaign saw her and Croydon Labour holding stalls on the borough’s high streets and run a petiton which the Waddon councillor says attracted more than 2,000 signatures.
The campaign borrowed heavily from the #FundCroydonFairly lobbying run by residents’ associations, trade unions and this website in 2023, when Mayor Perry hiked Council Tax by 15%.
The parliamentary petition launched by Inside Croydon attracted 10,000 signatures in a few weeks – more than any Croydon-based parliamentary petition before or since.
In 2023, Croydon’s Labour councillors ultimately abstained when it came to a vote on Perry’s Council Tax, something they did again in 2024 and 2025, rather than block the Tory Mayor’s unbalanced budgets. Their approach in 2026, when Perry brings forward what potentially could be the final budget of a disastrous term in office, may be instructive.
“Croydon is finally getting the funding it deserves!” Davis said tonight.
“Croydon’s years of being short-changed are over. Thank you to the Labour government for ending this injustice. And thank you to everyone in Croydon who has backed our campaign for Fair Funding.”
- Read Andrew Fisher’s open letter from Inside Croydon to the then Secretary of State: Dear Angela: It’s time for you to act and fund Croydon fairly
Read more: Reed confirms council funding formula will favour Croydon
Read more: Croydon and 99 other councils may seek government bail-outs
Read more: Now even Mayor Perry agrees we need to Fund Croydon Fairly
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Without a write-off of a substantial proportion of Croydon’s debt (currently £1.4 billion) Croydon’s finances are still going to be in crisis.
Labour government to give Croydon Labour £120m election funding boost
The same formula funding mechanism benefits councils of all colours and none.
From what I’ve seen Labour Wandsworth and Westminsiter havn’t received much of an increase if at all.
It’s really not possible to use a funding mechanishm to divert funds to a specific council when the formula says they shouldn’t get it.
That’s dumb, mate. Croydon is still a Conservative led council until is sent packing by the electorates in May.
That’s what the bribe is for. We all paid for it
It’s a very strange ‘bribe’ that’s being paid from public money and publicly announced and to be paid to a council currently run by the Tories.
Surely such a ‘bribe’ would be conditional on a Labour council being elected before the money is paid?
Don’t let P P Perry anywhere near this money!
Rowenna Davies was awful with her political showboating around this.
She didn’t submit anything to the national consultation that ran until August.
After it closed, she started a petition which she is now claiming resulted in the new funding formula. Absolute nonsense and typical lying from Labour.
Great result for Croydon – but nothing to do with her and her pointless petition.