Croydon Council is poised to receive a significant financial uplift totalling £120 million over the next three years, following the finalisation of a major national review into how local authorities are funded.
A Historic Overhaul of Council Funding
The government confirmed the changes on December 17, 2025, marking what it describes as a historic reset of the local government finance system. The reforms stem from the Fair Funding 2.0 model launched in June, which rewrites the formula used to distribute money to better reflect real levels of need in communities.
For years, Croydon and other outer London boroughs argued they were being short-changed, claiming the old system disproportionately favoured inner London areas. A key change in the new model is that housing costs are now factored in before calculating deprivation, a move that recognises how high living expenses in outer boroughs can mask true poverty levels.
What the Funding Means for Croydon
For Croydon, the reforms translate into a substantial 28 per cent increase in central government funding. This equates to an estimated £40 million each year for the next three years. The government has stated that the most deprived 10% of councils will see a 24% per-head funding increase on average.
Following the announcement, Croydon's directly-elected Mayor, Jason Perry, welcomed the decision. He told the Local Democracy Reporting Service (LDRS): "I welcome the Government listening to my formal representations on behalf of Croydon." He emphasised that securing fair funding had been a cross-party effort worked on for many years.
Mayor Perry added: "I now want to ensure any additional funding is used responsibly to support frontline services and continue stabilising the council's finances." In late November, he reaffirmed his commitment to keeping council tax rises within the current 5% cap.
Political Reactions and the Debt Challenge
The announcement sparked immediate political debate. Housing and Communities Secretary Steve Reed, who is also the MP for Streatham and Croydon North, said the extra annual funding would allow the council to improve services like street cleaning and support for older people. He praised Labour's 2026 mayoral candidate, Rowenna Davis, for her campaigning work.
Ms Davis stated: "At last, after years of Tory neglect, Croydon is finally getting the funding it deserves. Our years of being short-changed are over." However, Conservative councillors strongly rejected her claim to sole credit. Councillor Jason Cummings argued that achieving fair funding had been a cross-party objective for over two decades and resulted from formal engagement, not recent campaigning.
Despite the boost, significant financial challenges remain. The borough's Green Party mayoral candidate, Peter Underwood, warned that the changes may not resolve Croydon's deeper problems. He pointed out there was still no action on the borough's colossal £1.4 billion debt burden, meaning residents would continue to pay for past financial mistakes.
The government has also introduced a new multi-year funding settlement, giving councils three years of financial certainty to plan their budgets. It expects that by the end of this period, councils' core spending power will have risen by more than 23% compared to 2024/25 levels.
