Sir Sadiq Khan has warned the government that new plans to reform borough council funding would be a “false economy”, undermining the capital and hampering efforts to promote economic growth.
The government’s Fair Funding proposals, due to come into effect next year, would update the formulas used to fund councils all over England, which have remained unchanged for a decade, aiming for a system where “allocations are made based on the latest and best available data and recognise the areas where demand for council services is greatest”.
But the proposed new arrangements would create “big winners and losers”, according to the Institute for Fiscal Studies (IFS), with London, and inner London in particular, losing out most – prompting the all-party London Councils group to accuse the government of ignoring deprivation in the capital, where poverty levels after taking housing costs into account are the highest in the country.
The group has already warned the government that “after more than a decade of structural underfunding, rising demand and skyrocketing costs”, the change could have “devastating consequences” for London boroughs and their residents. The Mayor (pictured) told the London Assembly yesterday that he backs its call for a rethink.
“If London is to continue driving the national economy, we can’t risk repeating the mistakes of the past,” he said at Mayor’s Question Time. “Our city has suffered under the weight of austerity for too long. Now is the time for investment, not further cuts, which would only suppress growth and stifle our potential.”
The old formula needed to change, he agreed, but the new arrangements needed to take more account of the “disproportionately high housing and living costs in the capital” as well as appropriate deprivation indicators. “Otherwise we risk support being taken away from those who need it most. We all believe in those with the broadest shoulders carrying the greatest burden, but civil servants are in danger of not recognising that London councils in particular are carrying a huge burden already.”
Cutting allocations to London was also a “false economy, doing London down,” Khan said, responding to a question from Conservative Assembly member Thomas Turrell’s, in which he referred to a Labour MP in the north of England celebrating funding moving northwards.
“I welcome a fairer funding formula,” the Mayor continued, “but what I wouldn’t want is money taken away from London, not just because inequalities in London are huge, but because with the right support we can contribute even more to the Treasury, which can then support people across the country.”
The capital’s unique position, making an outsized 25 per cent contribution to the UK economy, needed to be recognised, but the continuing perception that the streets of London “are paved with gold,” also needed countering, he added. “They really aren’t, and the way the proposed formula works doesn’t take into account the needs of our city.”
City Hall would continue to make the case for fairer funding, alongside London Councils, Khan said, and Assembly chair Len Duvall suggested that the Assembly itself could also support that effort, with a further joint cross-party call on ministers. The Mayor agreed; “That would demonstrate a real coming together of ‘Team London’,” he said.
Watch the September Mayor’s Question Time here. The fair funding discussion begins at 2hrs, 36mins. Follow Charles Wright on Bluesky.
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