Government council funding to put £70 million+ black hole in Southwark finances

• £70 million+ black hole looms over Southwark’s finances under new Government plans
• Jobs and vital services at risk without urgent action from Labour council
• Lib Dems warn of ‘levelling down’ London as funding reforms penalise boroughs like Southwark 

Southwark Liberal Democrats have sounded the alarm over the Government’s proposed new funding formula for local councils, which they say unfairly “penalises” London for its high housing costs, density, and strong local economy.  

In a shocking revelation at last week’s Cabinet meeting, it was revealed that a reported £70 million gap in the council’s finances over the next three years would be a “best case scenario”, and the reality could be a much larger funding gap. 

The Government has announced a new funding formula for the cash it gives local authorities, intended to boost small towns and rural areas. However, the Liberal Democrats are warning that doing so by making swingeing cuts to funding for the capital risks strangling wider economic growth, and puts frontline services for residents in danger. 

Among the proposals includes a measure of deprivation that does not take housing costs into account – which in London means that household finances appear to be healthier than the reality of the cost of living. The new formula is also set to remove previous weightings that gave areas like Southwark with diverse populations more funding, and also prioritises sparsely populated areas, punishing areas like inner London that have high density housing. 

The reforms will also include a business rates reset. Business rates, which are increasingly a vital part of councils’ income, are currently topped up with a sum set in 2013 which was set against estimated levels of business rate income. A reset will mean areas like Southwark that have experienced higher than expected growth will effectively have that top up wiped out. The top up currently makes up around a fifth of the councils total income.  

Southwark Liberal Democrats have written to the new leader of the Council urging action to lobby the Labour government to reconsider its plans, and to lay out the plans the Council will put in place to ensure that Southwark is able to tackle the cost of living, build genuinely affordable homes, and cut crime. 

Commenting, Liberal Democrat Group Leader Cllr Victor Chamberlain said:  

“We all expected the era of austerity to be over when Labour won – instead, we’re seeing more of the same. We've already seen cuts to welfare, winter fuel payments, and a refusal to scrap the Tories’ cruel two child benefit cap. Now Labour are turning on London. This isn’t levelling up – this is levelling down. You can’t grow the national economy whilst pulling funding away from the nation’s capital. 

This is going to hurt Southwark residents – and with Labour at the helm at all levels of power, it’s up to them to make sure we’re able to deal with the cost of living crisis, build genuinely affordable homes, and keep our streets safe and clean. 

Residents need assurance that Southwark council is on their side – that's why we’re calling for the Leader to join us in asking the government to think again, and lay out how it will protect vital local services.”