London Council Warns of Service Uncertainty Despite Three-Year Government Funding Deal
The City of London Corporation has expressed cautious optimism over a shift from a one-year to a three-year funding settlement from the Government, while simultaneously raising alarms about persistent financial challenges that threaten vital local services. This development follows earlier warnings that funding reductions could necessitate a comprehensive review of service provision.
Funding Settlement Changes and Ongoing Concerns
Previously, the Corporation faced a projected drastic reduction in its Government grant, expected to plummet from £77 million to just £18 million by the 2027/28 financial year. Compounding this issue was the anticipation of receiving only a one-year funding settlement, unlike the three-year deals granted to other local authorities across the country.
Now, the Local Democracy Reporting Service has confirmed that the Corporation will indeed receive a three-year settlement, a move the City has welcomed. However, officials emphasize that this reprieve is temporary, with the substantial grant cut merely postponed until 2029/30, leaving a significant long-term funding gap unresolved.
Implications for Local Authority Services
In a report presented to the Corporation's Finance Committee last month, the proposed one-year settlement was described as having a "very impactful" effect on budget setting for 2026/27 and beyond. A Corporation officer starkly warned committee members: "Members, you need to be aware that the level of uncertainty around this could mean as much as a wholesale review of what we do as a local authority. This is not something where we can play around the edges with savings, this is categorically 'what services does this organisation provide as a local authority', potentially bottom up."
The Government grant supports essential services including street cleaning, waste collection, housing provisions, and library operations. The Corporation confirmed that the three-year funding applies to its City Fund, the core budget for delivering these local authority services, though it remains subject to annual review and is largely considered short-term transitional relief.
Official Response and Broader Context
Deputy Chris Hayward, Policy Chair at the City of London Corporation, stated: "We welcome the Government’s decision to provide three years of funding at the level we have been calling for. This reflects the constructive discussions we have had with ministers and officials, and we are pleased that our unique needs have been recognised."
He continued with a note of caution: "Because most of this support is transitional, it gives us breathing space, but does not remove the underlying challenges and means vital local services continue to face uncertainty. The City’s workforce is almost 80 times the size of our resident population, and the services we provide every day support London and the whole UK economy. We will keep working with Government to seek a sustainable long‑term approach that reflects the scale of those responsibilities."
This situation is not isolated to the City of London. Kensington and Chelsea Council is also grappling with severe impacts from the Government's funding changes, announcing it must implement £108 million in cuts, contributing to what it describes as a "tough budget" for 2026/27.
The funding adjustments stem from the Government's Fair Funding Review, which aims to redirect resources to councils deemed most in need. Beneficiaries include London boroughs such as Enfield and Croydon, along with larger authorities like Manchester City Council, which are set to receive increased funding.
