To: Ministry of Housing, Communities and Local Government
15 August 2025
Dear Sir/Madam
Consultation Response: The Fair Funding Review 2.0
Financial Context
Bromley has the 2nd lowest level of settlement funding in the whole of London despite having the 7 highest population. Bromley has the second lowest net expenditure per head for London and an article in Telegraph Money section dated 15 December 2023 considered various key local authority indicators and concluded that Bromley came second place for value for money out of 127 authorities reviewed.
From 1997/98 to 2024/25 our net budget has reduced by 27 percent in real terms and 37 percent per capita due to reductions in Government funding. Significant detrimental changes were made to funding for Bromley, including changes to core funding in 2003/04, with further changes since. If Bromley received the average grant funding for London per head of population in 2025/26, this would result in an increase in grant funding of £80.4m
There are significant growth/cost pressures facing the Council and the 2025/26 budget report included growth/cost pressures of £32.4m (£46.9m less mitigation of £14.5m) which has only partly been met by increases in government funding levels. In addition to the mitigation savings, the Council has also delivered £19m transformation savings and yet still has to rely on the drawdown of reserves totalling £14.1m which is not sustainable. The future years ‘budget gap’ will increase significantly without adequate additional funding to reflect the ongoing cost pressures for adults and children’s social care, special educational needs and temporary accommodation for the homeless. It is important to recognise that the cost pressures on these statutory services remain and the Council received lower levels of additional funding in 2025/26 due to revised formulas relating to additional grants.
The further impact of the new funding proposals for 2026/27 and future years would effectively increase the Council’s ‘budget gap’ and future years would create an unsustainable financial position for the Council. To match the formula used by the funding proposals to cover the average national council tax would require an equivalent increase in Bromley’s council tax of 29 percent. This has to be considered against a referendum limit of 5 percent. In addition, the funding for the DSG deficit, which reflects a wider national issue adds to the unsustainable financial position for the future.
Being a low cost authority limits our ability to realise significant savings compared with other higher cost authorities. The combination of all these factors could result in the Council fully exhausting its revenue reserves within 2 years and seeking Exceptional Financial Support or worse. Hence, we would be facing an unsustainable financial position with no recognition of the fair level of funding required by the Council.
It is important to recognise that many services will continue to face cost pressures considerably higher than general inflation. Council tax increases, with referendum limits in place, can meet general inflation and other changes but not the scale of cost/growth pressures facing the Council. There should be more Government funding provided rather than a reliance on local taxpayers to meet the significant costs or the need to find savings on key services that matter to residents.
We are disappointed that rather than a full ‘fair funding’ assessment, the proposals mainly reflect a redistribution of mainly existing funding which does not recognise the financial challenges facing local authorities.
The funding proposals are detrimental to the financial resilience of the Council. This highlights the need for significant fiscal and legislative reform beyond the existing proposals to ensure that Bromley can continue to deliver effective services whilst remaining financially sustainable.
Key Asks for 2026/27 and future local government settlements for Bromley
Key asks for Bromley are summarised below:
- The funding should reflect a mechanism to reward low-cost and efficient authorities like Bromley (2nd lowest cost among ‘nearest neighbours’ group and 6th lowest out of 113 unitary, metropolitan and London boroughs, using 2023/24 estimate data).
- Recognition of the cost increases exceeding general inflation increases across many Council’s services together with the revenue impact of Council’s Capital programme with cost increases arising from the implications of high building inflation, supply availability issues and higher financing costs (compared to low interest rate period).
- Funding needs to recognise higher London costs which impacts on service costs and the financial impact of need. This has not been adequately recognised in settlements for Bromley.
- Remove restrictions that prevent local authorities from raising or spending their own resources - we need more flexibility in place to make the best use of our resources for our residents.
- Introduce more flexibility to Councils allowing statutory charges to increase, as a minimum, to match increases in costs.
- The 2026/27 settlement, together with the future Spending Reviews should recognise Bromley’s cost pressures whilst remaining a low cost authority and facing a substantial budget gap. The majority of the Council’s spending is directed towards statutory services. Years of annual budget cuts, combined with a low cost base, mean there are limited options available to achieve further savings.
- Bromley is the largest London borough by geography at 58 square miles. The borough has over 330,000 residents (2024), projected to increase to 350,000 by 2028 and to 395,000 (19 percent) by 2038. Future funding should more accurately recognise the existing demographics as well as the financial impact of projected demographic changes.
- There should have mechanisms in place to ensure all new burdens are fully funded. New burdens doctrine was expected to be transparent in recognising and funding additional cost pressures for local authorities arising from changes in government policy. There are many examples of additional burdens without adequate funding being provided. There are also further potential new burdens in the medium term including, for example, expansion of the UK Emissions Trading Scheme to cover energy from waste which could have a detrimental impact on costs to Bromley.
- Benefits data which is used in determining needs assessment does not reflect low level of take up (can it be adjusted to reflect lower take up compared with rest of country?) or the impact of higher housing costs in London. Measuring deprivation levels after housing costs gives a more realistic assessment of disposable income. We therefore urge government to update deprivation measures to reflect “income after housing costs” or, where that is not feasible, to supplement existing indices with an additional factor to capture this reality. Without such a change, areas facing the greatest housing pressures will remain structurally underfunded and less able to meet demand.
- We have previously raised our concerns about the complexity and lack of transparency within the current local government finance system. We appreciate the announced move to multi-year settlements from 2026/27 and some action already taken on the removal of ring-fencing of some funding streams to enable flexibility to re-divert resources according to Iocal priorities. However, the changes being proposed need to be fully transparent and the comments raised in response to the questions (attached) addressed. It remains essential that any whole solution that provides a sustainable platform for the future includes resource equalisation and transitional arrangements.
- We ask that the Government completes the SEND review and provide adequate funding to eliminate existing DSG deficits as well as prevent the medium-term funding shortfall and avoid a potential financial impact on the Council’s general fund – the Council faces a cumulative deficit of £85m by 2028/29. The significant deficit is partly a consequence of extending the age range for eligibility for support without additional funding being provided (new burden). The longer-term impact of COVID-19 is also likely to have contributed towards additional cost pressures without adequate funding being provided. Any decision to continue with the extension of the statutory override in place is not sustainable and effectively delays the need to deal with the root cause of the funding problem identified above. The anomaly should also be addressed where the council taxpayer is required to fund special educational needs transport costs of around £17m per annum which should logically be funded through education funding as it is part of the overall SEN package of costs.
- We welcomed the review of children’s social care launched by the previous Government in January 2021 which ‘will set out to radically reform the system’ and hoped that this would have thoroughly considered the costs pressures on children’s social care and the need for adequate funding to improve children’s lives. The outcome did not address the funding challenges for children’s social care and costs continue to increase to reflect societal changes, demographic changes, improved healthcare and high-cost increases amongst the limited number of residential care providers. The proposed children’s formula would result in significant losses of funding for Bromley despite the ongoing cost/growth pressures. This formula has not been sufficiently tested with the local government sector, and uses measures that do not fully and accurately reflect the drivers of need and deprivation, particularly given London’s high housing costs. We urge the government to work with Bromley and others on revisiting and refining this formula before it is implemented. This proposal is particularly challenging given the recent communication from Department for Education proposing to introduce new statutory targets from August 2025 as part of its “Giving every child the best start in life” programme. These targets will require increased investment in early help, safeguarding, and specialist services. It is more challenging to expect the Council to deliver improved outcomes against new statutory requirements while removing a substantial proportion of the resources needed to achieve them. The funding is not realistically matching the required statutory level of spend.
- Recognises the true financial impact of essential highways maintenance and repair in a geographically large borough with an extensive road network. There should also be the direct allocation of pothole funding to individual local authorities and early indication of additional funding available, to enable effective planning of essential works.
- On adult social care there is still a need for a fundamental solution to address long term funding. There remains an interdependency between social care and NHS services and with high level hospital waiting lists and its impact of adult social care, there is a need for diverting some of NHS funding towards adult social care to ensure the NHS can deliver its key requirements. We recognise the recent announcement of an independent commission into social care to inform reforms but this is not scheduled to be published until 2028 which is too long given the state of the Council’s level of inadequate funding towards such services. This should be brought forward recognising the significant financial challenges facing local authorities.
- There needs to be further improvement for funding to meet homelessness and prevention costs. Although we have been successful in developing innovative opportunities with external partners to deliver temporary accommodation and affordable/social housing to help meet increasing demand, this is still not enough. Government must consider how this serious and increasing pressure is managed and funded in the long-term including consideration of scaling back statutory duties. Although we recognise that there is some additional provision for such costs within the Fair Funding 2.0 it does not go far enough to meet the cost/growth pressures facing the Council. There should also be an increase in local housing allowances for all types of social housing through the Council together with a review of funding for new homes including more financial incentives to build housing stock. Unless the formula fully accounts for the scale and distribution of the local housing allowance subsidy loss and increasingly high temporary accommodation costs, there will be underfunding and the financial impact of TA will continue to erode our ability to invest in prevention and other vital services.
- The Council continues to seek to increase in the de minimus level of housing units required to open a Housing Revenue Account (HRA), from 200 to 1,000 units. Some councils face an unsustainable financial position on their HRAs and until the necessary reforms are in place we are seeking the flexibility to enable us to have the choice of when to reopen the HRA and work towards a higher de minimis limit.
- We previously welcomed the additional funding relating to the extended producer responsibility towards the significant costs relating to the responsibility for waste collection and disposal as well as other factors. There needs to be separate consideration of funding for any new financial burden arising from any extension of the UK Emissions Trading scheme to cover energy from waste.
- Future Spending Reviews needs to consider any implications arising from pension reforms (LGPS) and ensure that such reforms do not have a detrimental effect (or unintended consequence) or reducing overall investment performance which could increase the ultimate costs to local council tax papers.
- There were 1,335 statutory duties as at June 2011, identified by the National Audit Office. There has been no overall reduction in statutory duties to date despite overall significant funding reductions. This highlights the importance of considering the full impact of any new burdens affecting local government. Without additional funding or freedoms, the Government should consider reviewing the role and duties of local government to match the potential resources available. Fundamental reform is required to deliver sustainable finances for Bromley and other boroughs
Working with Government
We note the response from Mr McMahon to a LGA councillor forum that he has commissioned a government wide review to look at reforms that could better support local government and he also referred to “system failures” in housing and adult social care that were to blame for rising council costs and is “why reform is so important” He also referred to these failures “have become your financial burden.”
You will be aware that London boroughs already face a growing financial crisis following years of underfunding and rising demand for services with London more reliant on emergency borrowing and asset sales to balance their budgets than any other part of the country - nearly a quarter of boroughs reliant on Exceptional Financial Support (EFS), the highest rate of any region in England. These proposals do not provide a sustainable financial solution for the Council and without improved funding the Council will face a similar situation in the future.
EFS was supposed to be a temporary solution but is now becoming more widespread and less sustainable. In effect, a growing number of councils are running structural deficits from year-to-year. The existing EFS regime is not supporting councils to get out of financial distress, as evidenced by the two boroughs in London who have been in receipt of it for several years seeing their amounts increase significantly this year. Once any viable surplus assets have been sold and capital receipts exhausted, support comes in the form of additional borrowing which simply leads to growing financing costs and, ultimately, the need to borrow even more. There is an inequity in relying on asset sales to fund these gaps as different councils will have different asset bases due to historic factors. This approach, similar to the DSG statutory override, goes against standard accounting practice straying into the territory of funding revenue pressures with capital funding.
We welcome the opportunity to respond to the Fair Funding 2.0 review. After more than a decade under the existing funding formulae, there is a clear need to reform the local government funding system and ensure funding is distributed on the basis of need. We would want to contribute further to ensure the Fair Funding Review 2.0 can be a success and would want to contribute to all the Government announced reviews and any future reviews.
Yours faithfully
Peter Turner
Director of Finance