Teesside councils are the North East’s main winners from the government’s new “fair funding” formula for allocating grants to local authorities to support public services like social care and bin collection. But most of the metropolitan districts in Tyne & Wear will be faring relatively badly compared with the England average by the 2027/28 financial year.
The new fair funding system for calculating grants for 353 councils, combined authorities, police and crime commissioners and fire authorities is intended to shift government grants away from prosperous areas to the most deprived.
For the first time the local government finance settlement, as it is called, which was announced on the penultimate day before the Christmas parliamentary recess, is for three years instead of the usual one, to help councils plan their budgets with greater certainty.
A press release from the Ministry of Housing, Communities and Local Government (MHCLG) was headlined “£78bn for councils…to cut deprivation”. But that sum refers to councils’ core spending power (CSP), which is made up of government grants, council tax and retained business rates. It assumes that council tax will be raised annually by the maximum 5%.
Nominal CSP will rise faster than the national average for all 12 local authorities in the region except North Tyneside next year compared with 2024/25. But by 2027/28 Gateshead, South Tyneside and Sunderland will be falling behind as well.
Middlesbrough is the biggest winner, with a 20.6% CSP rise next year compared with 2024/25, increasing to 40.6% in 2028/29, as against England averages of 13.5% and 23.6% respectively. Hartlepool follows with 18.8% and 33.4%. The increases in CSP reflect their high ranking at or near the top of the recent Index of Multiple Deprivation, as reported in NEB.
Teesside’s other two councils, Stockton and Redcar & Cleveland, will also benefit from regular above-average CSP across the three-year year Settlement. Darlington will end up with a 23.6% increase, exactly in line with the national average.
In Tyne & Wear, only Newcastle will enjoy consistent above-average increases, ending 26.7% up. Durham and Northumberland will also receive three successive years of above-average rises, though not by much in Northumberland.
Reality
As can be seen from the table below, Middlesbrough, followed by Hartlepool, will also forge ahead to the end of the Settlement period in 2028/29 when the figures are presented in real terms, taking account of officially forecast inflation, and on a per capita basis. Stockton will also fare relatively well, while Redcar & Cleveland, Northumberland, Durham, Newcastle and Darlington all beat the national average.
But Gateshead, Sunderland and to a lesser degree North Tyneside will barely keep pace with inflation and South Tyneside will actually fall behind.
These outcomes will be especially disappointing for the three metropolitan districts south of the Tyne. They were singled out as most at risk from the government’s fair funding review in a letter to ministers from North East Mayor Kim McGuiness and the seven local authorities in her area in August, as reported in NEB.
“South Tyneside, Gateshead and Sunderland councils,” they wrote, “are examples of three authorities that have suffered some of the deepest cuts during austerity, face significant pressures given the nature of their populations, have some of the most deprived areas in the country yet, under the new system, will lose out considerably.” And so it has come to pass.
