Peterborough City Council leader confident government funding reforms will help tackle ‘severe’ financial challenges

The government announced plans to scrap outdated funding formulas which it claimed had penalised deprived areas for decades.

Its new ‘fairer funding’ model, which is backed by a £5 billion boost for local services over the next three years, will ensure councils are funded based on the latest deprivation data and local need so that communities with the highest demands get better access to public services.

On November 20, Minister for Local Government, Alison McGovern, said: “It’s simply wrong that where you live determines the quality of services you get and ultimately determines your life – from birth to old age.

“These reforms end that injustice. By using up-to-date data and targeting funding to areas with greatest need, we’re reversing years of unfairness and unlocking opportunity in every part of the country.”

While the exact figures for each council are not yet clear, top figures at Peterborough City Council seem confident that the new model will help to improve the authority’s challenging financial situation.

Leader Cllr Qayyum said: “This latest announcement from government on fairer funding is fantastic news for councils like ours which have faced ongoing and severe financial challenges for more than a decade because of funding which has not kept pace with population growth and demand.”

Peterborough City Council is currently forecast a £6.1 million overspend on its net revenue budget by the year end. Extra funding from government could place the authority in a much better position come the beginning of the 2026/27 financial year.

Cllr Qayyum added: “We are still working through what this means for Peterborough in terms of actual funding from next year on, but we are confident it will go some way to addressing our ongoing financial challenges and allow us to start investing more in our city for the benefit of all our residents.

“Finally a government has listened and understood that for too long some councils have prospered as a result of an out of date funding formula, and others, like ours, have needed to cut services year after year to continue to meet our residents needs the best we can.

“For this government to hear our plight, and overhaul the whole system of funding for local government, is nothing short of remarkable.

“It is also welcome news that they are reconfirming investment in children’s social care reforms so every child has the best start in life, and in housing, rough sleeping and domestic abuse to focus on prevention services and a move away from over reliance on temporary accommodation.

“Additional funding is also being made available for areas with greatest immediate needs and less ability to raise income locally.

“We look forward to next month when we can fully understand how fairer funding will impact on our budget in 2026/27 and beyond.”

Cllr Pete Marland, chair of the Local Government Association’s resources committee, said: “The previous opaque funding system has weakened councils’ financial sustainability and essential services.

“There are some positive measures included in these reforms such as multi-year settlements, fewer fragmented ring-fenced grants and reduced reliance on competitive bidding.

“However, some councils will clearly do better than others from these allocation plans.

“It is good that government has pledged some extra transitional support but we reiterate our call for all councils, both rural and urban alike, to be protected from real terms cuts to ensure their financial sustainability.

“It is now critical that the provisional Local Government Finance Settlement is published as a matter of urgency so councils are not waiting until the Christmas period to understand what allocations they will receive.”

How will the new model work?

The government has set out how the new approach to funding councils would look:

Closing the gap: Funding allocations will now reflect true local need using 2025 Indices of Multiple Deprivation, population projections, and service demand.

Protecting vulnerable families: £2.4 billion for children’s social care reforms over the Settlement– so every child gets the best start in life.

Tackling homelessness and supporting domestic abuse survivors: At least £2.4 billion for a new ring-fenced combined Homelessness, Rough Sleeping and Domestic Abuse grant over three years including funding on prevention services and a move away from over reliance on temporary accommodation.

Targeted support: £600 million Recovery Grant maintained for areas with greatest immediate needs and less ability to raise income locally.

Fairer housing incentives: Councils keep all additional council tax from new homes – boosting local growth and home ownership.

Simplifying the system: Cutting red tape by consolidating more than 30 funding streams into five – worth nearly £47 billion over three years.

Equalising for local income: Directing funding towards the places that are less able to meet their needs through locally raised income so residents get the same level of service.

Certainty and stability: First multi-year Settlement in a decade, with funding floors and phased changes to protect councils during transition.