Council tax payers in some, and perhaps all, the North East’s local authority areas will start getting some relief next year as the government begins to shift grants from more affluent to the most deprived areas.
Ministers will take account of the 2025 Index of Multiple Deprivation (IMD25), discussed here on 3 November, when determining the level of grants for individual councils for the coming three years.
This should benefit all councils in the region. Middlesbrough is the most deprived local authority district in England and Hartlepool third. North Tyneside is the least deprived in the region but still ranks as 72nd most deprived out of 296 in England.
Another factor to be taken into account will be each council’s tax base – its ability to raise tax locally due to the comparatively large number of low-value homes and a small business base across the region.
The new funding system, which North East councils have been calling for for years, will be phased in over three years, starting in 2026/27. First details of how much each council will receive are expected to be announced shortly before Christmas.
“Ending an injustice”
According to a policy paper from the Ministry of Housing, Communities and Local Government (MHCLG): “This new system will target a greater proportion of grant funding towards the most deprived places that have suffered the most from cuts in recent years, because they have been less able to generate funding through local council tax and business rates compared with other places. A fairer system means that local authorities in the most deprived places will now see significant funding increases, enabling them to reinvest in services that local people rely on.”
Local Government Minister Alison McGovern said: “It’s simply wrong that where you live determines the quality of services you get and ultimately determines your life – from birth to old age.
These reforms end that injustice. By using up-to-date data and targeting funding to areas with greatest need, we’re reversing years of unfairness and unlocking opportunity in every part of the country.”
The new funding formula may ease the worries of North East councils that it would make them worse off, with South Tyneside, Gateshead and Sunderland most at risk –an outcome which they described as “perverse…and surely not what the government intended.”. It may also help bail out Durham County Council, which faces a black hole in its medium-term financial plan.
Comment
The new so-called fair funding is not the end of their financial woes for North East councils. As the MHCLG policy paper says: “These systemic issues cannot be repaired overnight – it is a long road to fix the foundations of local government from where we have been.” Most councils in the region may very well still increase their council tax by the maximum permitted 5% next year. But it’s a start.
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