York Council could lose an estimated £15 million if proposals to reform funding go ahead in their current form, the authority’s finance lead has warned.
Council Chief Finance Officer Debbie Mitchell has told the Government its Fair Funding Review proposals would see York remain one of the country’s lowest-funded authorities.
Cllr Katie Lomas, finance spokesperson for the council’s Labour administration, said final proposals were expected to be better than initial models suggest with efforts underway to improve York’s position.
But Cllr Paul Healey, the Liberal Democrat opposition’s finance spokesperson, said the review looked to be anything but fair and it threatened to leave York permanently disadvantaged.
A Government spokesperson said no decision on changes to funding had been made and the current system had left communities behind and damaged local services.
It comes as the Labour Government is expected to unveil its final reform proposals in the autumn following a consultation with councils which ended in mid-August.
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The changes which are adopted would inform the way national funding is allocated to councils for the coming 2026/7 financial year and beyond.
The Government is aiming to change funding formulas so they better account for deprivation and direct more cash towards areas which are less able to raise income locally.
Ministers have said changes would help councils cope with spiralling costs, rising demand for services and previous funding cuts and around £2bn could be redirected to areas most in need.
But the Institute for Fiscal Studies (IFS) think tank said that while the reforms would see funding better aligned with service needs, around a quarter of councils could lose out.
York Council’s Ms Mitchell told councillors earlier in August the authority looked set to come off badly from every change currently proposed though it was too early to be certain.
The finance lead has since said York would lose out from proposals to divert funding to areas which raise less from council tax, as well as from wider formula changes.
Ms Mitchell said in her response to the Government’s consultation: “As a low funded, low spending council this methodology will perpetuate the current situation whereby York is one of the lowest-funded local authorities.
“We estimate the impact of the measures in the proposed funding model will be to increase our existing three year budget gap by approximately £15 million.”
The council’s existing overspend for this financial year is currently forecast to be £4.4 million, according to a report set to go before its executive on Tuesday, September 2.
Ruling Labour’s Finance Executive Member Cllr Lomas said while early indications were not what the council had hoped for, it was important to stress that the review process remains ongoing.
The executive member said: “Extensive lobbying efforts have been taking place for some time, this is a team effort from political leaders to make the case for York.
“Residents can be assured that we will stand up and challenge our party in Government to get the best deal for York.”
But Liberal Democrat Cllr Healey said the council’s own finance lead’s assessment of the changes was devastating.
The opposition finance spokesperson said: “The Government’s so-called Fair Funding Review threatens to dump an extra £15 million burden on York’s council tax payers.
“It seems this Labour Government is hellbent on punishing York, will Labour locally stand up to their own Government’s unfair plans?”
Cllr Chris Steward, leader of the council’s Conservative group, said the proposals threatened to leave York with worse settlements despite Labour protests about funding under his party’s Government.
Cllr Steward said: “‘For 14 years, Labour in York said there was not enough money coming to York.
“Since the government changed to Labour they have gone totally silent.”
The Government’s spokesperson said estimates of how much money York could lose due to the review should be treated with caution.
The spokesperson said: “The current, outdated way in which local authorities are funded must change.
“That is why we are taking decisive action to reform the funding system so we can improve public services, while maintaining the previous government’s limits on council tax rises so taxpayers are protected from excessive increases.”
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