London Councils urges government to reconsider key elements of plans to reform council funding, highlighting need to accurately measure “high levels of deprivation” in capital
London Councils has urged the government to reconsider key elements of plans to reform council funding in its response to the Fair Funding Review 2.0 consultation, which closed last week (15 August).
- Details
In particular, the cross-party group highlighted the need to accurately measure the capital’s high levels of deprivation, with the impact of housing costs properly factored in.
The government’s reforms, which set out a new approach to distributing funding between local authorities in England, are due to be implemented from 2026/27.
However, London Councils warned that “flawed” deprivation measures risk undermining the government’s aim of ensuring funding follows need.
The organisation said that the deprivation measure currently proposed gives “road distance to a post office” equal weighting to levels of homelessness – suggesting these factors have the same level of impact on deprivation in a community.
The cross-party group also raised concerns about:
- The inclusion of a new, "unevidenced" ‘remoteness’ factor. This would redistribute funding to account for a theoretically higher cost of providing services in more remote areas.
- The proposed formula for children’s services. This “dramatically underestimates” the level of need in the capital and has “questionable” robustness and accuracy, according to research published by the National Children’s Bureau.
Looking at housing poverty, London Councils said: “Housing costs take up the largest portion of most household spending. How much someone pays for housing has a significant impact on their disposable income, and the wider impact of housing availability and homelessness is a significant driver of deprivation.
“However, the government plans to use the Index of Multiple Deprivation (IMD) to measure deprivation, which fails to account for these impacts as it does not adequately reflect housing poverty.”
Housing poverty is a particular concern for the capital, with one in 50 Londoners currently homeless and living in temporary accommodation.
Cllr Claire Holland, Chair of London Councils, said: “We have long called for reform to local government funding to ensure money is distributed fairly on the basis of need. However, the current proposals risk failing to achieve this. After more than a decade of structural underfunding, rising demand and skyrocketing costs, the impact on London could be severe.
“It is right to focus resources on areas with the highest levels of deprivation, but we can’t ignore deprivation in the capital – London has the highest rate of poverty in the country once housing costs are factored in. It is difficult to explain how proximity to a post office affects someone’s life as much as homelessness, yet these factors are given equal weighting under the current proposals.
“As the government considers the responses to the consultation, we will continue working with them to ensure we create a funding regime that genuinely matches resources to need and helps restore financial stability to the sector. This is critical to us delivering on our shared priorities, including building homes, creating jobs and driving economic growth.”
The Ministry of Housing, Communities and Local Government has been approached for comment.
Lottie Winson
Jobs
Police Misconduct & Vetting Solicitor
Locums
Poll
Events
15-09-2025 10:00 am
08-10-2025 10:00 am
Directory
