London Councils Face Losing Half Their Share Of Children's Services Funding
6 min read
Some of London’s poorest areas could see their share of funding for children’s services halved under Labour’s plans to reform local government grants.
The proposed New Funding Formula would change how the government distributes funding between councils across England, with the aim of redistributing money towards more deprived areas, such as northern cities that experienced significant cuts under austerity.
The government’s consultation on the proposed formula ended in mid-August, amid growing concern over its impact on London.
Research published last month by the Institute for Fiscal Studies think tank suggested that overall funding for Camden, Hammersmith & Fulham, Kensington & Chelsea, Wandsworth and Westminster councils would fall in real terms by more than a quarter over the next three years under the proposed NFF, with even the maximum permitted council tax rises only making up around half this shortfall.
Now, the most detailed projections so far, calculated by the representative body London Councils, show that some local authorities’ share of national funding for children and young people’s services would be halved by the NFF compared to the current formula, which was introduced in 2013/14. Councils in London would be far worse affected than anywhere else in England.
The biggest cut would hit the City of London Corporation, which governs the Square Mile and has around 11,000 residents. According to London Councils’ analysis, its share of national CYP grant funding would fall by 73 per cent under the NFF compared to the current formula.
But many councils with much larger and poorer populations would also experience significant drops in their share of national CYP funding:
Haringey: down 52 per cent
Lewisham: down 51 per cent
Brent: down 50 per cent
Redbridge: down 49 per cent
Kensington and Chelsea: down 48 per cent
Newham: down 48 per cent
“The proposed changes to the funding formula effectively increase resources for children and young people in one part of the country by removing resources from children’s services in London,” Karen Buck, the former Labour MP for Westminster North, who served as shadow welfare minister, told PoliticsHome.
“Local government has borne the brunt of austerity over 15 years across the country as a whole. Yet I find it incomprehensible that anyone could look at the cost pressures and complex needs facing London boroughs and decide that their children’s services are overprovided or overgenerous, especially given spiralling costs in other areas, such as homelessness.
“The case for supporting children and young people’s services in the rest of England is unarguable, but this must not be funded by removing help from deprived communities and households in the capital.”
Last month, PoliticsHome reported that Labour MPs in the capital had warned the government that proposed reforms to the formula had "massive flaws" and would also damage the party's electoral prospects in London ahead of elections there in May.
A recent report by the National Children’s Bureau and advisory firm Public Alchemy, commissioned by London Councils, found that councils in London expected to cut early intervention, preventative services and family hubs if their CYP funding fell by ten percent, while a 20 percent reduction would have a “colossal impact on their ability to deliver services” and would “start to impact their ability to deliver statutory services”.
"The new proposed formula risks underestimating the level of need in local authorities across the country and could halve the funding that some London councils receive for vital support for children, young people and families,” said James Shutkever, social care programme lead at the National Children's Bureau.
"We have seen time and again that cash-strapped local authorities are forced to prioritise costly crisis intervention over early help. But this sets off a vicious circle whereby the needs of children and families increase because they don’t get help as soon as they need it. We are concerned that the new formula will exacerbate the situation, particularly for local authorities in London."
Overall, London’s share of national CYP funding would fall by 38 per cent under the proposed NFF, leaving limited room to subsidise children’s services from other budgets. While birthrates in inner London have fallen faster than the rest of England over the last decade, that isn’t true of outer London.
PoliticsHome analysis of Department for Education data shows that London’s overall share of the nationwide caseload of children in need and child protection plans, two key areas of children’s services activity, was broadly the same in 2024 as it was in 2013.
Critics say the proposed NFF underestimates childhood deprivation in London by disregarding housing costs, and warn that some of the metrics it does use – such as parental qualifications, national census survey responses on children’s health, and the number of children receiving free school meals – are unreliable indicators of children’s needs. For example, far fewer children were marked as being in poor health in the last census than have registered special education needs, while not everyone whose children are eligible for free school meals actually claims them.
Claire Holland, chair of London Councils, said: “After more than a decade of structural underfunding, London boroughs face funding shortfalls in the hundreds of millions, growing reliance on Exceptional Financial Support and unsustainable overspends in areas such as homelessness, adult social care and children’s services.
“Against this backdrop, the proposed children’s services funding formula risks dramatically underestimating need in London by using a methodology that ignores the impact of housing costs in deprivation measures, relies on subjective health metrics and fails to account for children with SEND. We need a funding formula that genuinely reflects levels of demand and deprivation in different parts of the country, or councils risk being left without the resources they need to provide vital services for children and families.”
Waltham Forest council's share of national CYP funding would fall by 46 per cent under the NFF compared to the current formula, despite the council overspending its children's social care budget by £8m in 2024/25. Its share of the national caseload of children in need episodes has risen markedly since 2013, while its share of the national caseload of child protection plans was roughly the same in 2024 as it was in 2013.
“We are hugely concerned that under the proposed new funding formula, Waltham Forest would lose much-needed funds,” said Grace Williams, leader of Waltham Forest Council.
“The proposed Children and Young People’s Services formula would have the single biggest impact. We are particularly concerned that housing costs are not factored in when considering deprivation, that eligibility for Free School Meals is being undercounted, and that the rationale for some of the changes that have been made to the original formula is not clear.
Neither the Ministry for Housing, Communities and Local Government nor the Department for Education responded to a request for comment.
