Kensington and Chelsea Council to challenge 'unfair' government funding formula, losing £108 million

Kensington and Chelsea Council to challenge 'unfair' government funding formula, losing £108 million

Kensington and Chelsea Council is preparing to challenge the government over what it deems an unfair and unreasonable funding formula that will strip £108 million from its resources over four years.

The council's Leadership Team has formally agreed to use the Sustainable Communities Act 2007 to request alternative funding solutions from the government, a move overwhelmingly supported by residents in a recent consultation.

Councillor Elizabeth Campbell, Leader of the Council, described the funding settlement as unfair and unreasonable and highlighted that the projected reduction represents over 40% of the council's controllable budget. This significant cut, she stated, cannot be absorbed through efficiencies alone without severely impacting frontline services and potentially increasing council tax.

'Unfair and Unreasonable' Formula

The council considers the government's Fairer Funding formula to be unfair and unreasonable due to its projected impact on resources. Councillor Campbell stated, it is the hardest thing from fairer funding. It is unfair funding and it is an unreasonable decision that is going to have harsh consequences and stark consequences for the residents that we represent. Residents also expressed concerns that the formula penalises councils that invest in their local economy and businesses, as they are punished by having their business rates taken away. Furthermore, the formula is seen as not reflecting the high housing costs and population density in Kensington and Chelsea, and the council feels it should not be penalised for keeping Council Tax low.

Impact on Frontline Services and Council Tax

The £108 million funding loss is projected to have harsh consequences and stark consequences for the residents that we represent. Councillor Campbell warned, This unprecedented reduction... is quite impossible to absorb that amount of defunding without incredibly tough decisions that we're going to have to make. The meeting summary noted that 40% of our spendable money on children is going to be cut, a figure that Councillor Catherine Faulks found shocking, questioning how is that going to work when we've got to carry on, and we will carry on getting the basics right, delivering for our children, because we are really ambitious for them.

The council anticipates that tough decisions will be necessary regarding service delivery levels and that nobody can react to a 40% cut in your budget. It's just, it's unfathomable to have to make those changes so quickly. If efficiencies cannot absorb the funding gap, council tax payers could face further harsh consequences and stark consequences. A consultation on the Council Plan indicated that residents were asked to choose between reducing services and increasing Council Tax, with more favouring raising Council Tax to protect services than keeping it low with significant reductions.

Alternative Funding Solutions

Under the Sustainable Communities Act 2007, Kensington and Chelsea Council is formally requesting the government to provide alternative funding solutions to its Fairer Funding formula. Consultation responses indicated that residents prioritised allowing the Council to retain a greater share of locally generated income, such as business rates, stamp duty and income tax and giving the Council more time to adapt to significant changes in Government funding. Other suggestions included fairness and the redistribution of funding away from efficient councils, improving efficiency, accountability and public sector spending reform, and protecting essential services and vulnerable residents.

Council's Controllable Budget and Vulnerable Areas

The £108 million reduction represents well over 40% of our controllable budget. While a precise breakdown of the controllable budget is not detailed, the council spends £27 out of £100 on adults and £27 out of £100 on children of council tax. Councillor Faulks highlighted that 40% of our spendable money on children is going to be cut. This indicates that Children's Services and Adult Social Care are particularly vulnerable to the proposed cuts.

Comparison to Other Authorities

While direct comparisons to other local authorities are not provided, it is noted that fellow London Boroughs; Westminster City Council, the London Borough of Richmond upon Thames and Wandsworth Borough Council, who each face comparable reductions under Fair Funding, will also be submitting proposals. Kensington and Chelsea is described as a unique borough in central London with the fourth highest population density in London, presenting challenges such as traffic congestion, air pollution, and a high number of visitors. The council was also recognised by IMPOWER as being the most productive Council in the country, measured by looking at the outcomes achieved for residents per pound spent.

The decision to formally challenge the funding formula was backed by a public consultation which received nearly 1,500 responses, with 93% in favour of the council challenging the arrangements. Residents prioritised retaining a greater share of locally generated income, such as business rates, and having more time to adapt to funding changes.

Read the Agenda frontsheet and Public reports pack for more details.