In a meeting held on 27 August 2025, Councillor Imogen Shepherd-DuBey, Executive Councillor for Finance and Governance, reviewed and approved the council's response to the government's Fair Funding Review 2.0 consultation, also noting a letter sent to the Ministry of Housing, Communities and Local Government (MHCLG) by Councillor Stephen Conway, Leader of the Council, regarding the same. The consultation concerns potential impacts on the council's future financial position.

Fairer Funding Consultation Response

Councillor Imogen Shepherd-DuBey, Executive Councillor for Finance and Governance, approved the formal response to the Fair Funding Review 2.0 consultation¹ and noted the letter sent to the MHCLG by Councillor Stephen Conway, Leader of the Council.

The Labour government has committed to reviewing the allocation of funding across local authorities, with the aim of enabling councils to improve the lives and surroundings of residents. The new arrangements, intended to consolidate a number of funding streams, are expected to be in place for the 2026/27 financial year as part of the first multi-year settlement for local government in 10 years.

The government consulted on its proposed guiding objectives and principles in February 2025. Wokingham Council responded with concerns about the proposed approach for allocating funding, which was predominantly based on measures of deprivation and would not properly reflect local demand and costs faced in Wokingham.

The government has now issued further detail of the proposed approach and has asked for responses and feedback as part of a formal consultation. They propose to then issue their response and final policy position in a Policy Statement in autumn, followed by the provisional Local Government Finance Settlement before the end of the year.

The proposal is complex and includes data sets, indices and calculations to measure local demand and costs for every local authority. The report stated that although the previous formula has been updated and improved, it has flaws and does not reflect the true costs faced by a local authority. It can only ever be a blunt instrument that can provide an indication of where additional cost pressures may be faced, and should only be used as a guide as opposed to a true calculation of the real costs faced by each individual local authority.

The approach seeks to get each local authority to their calculated entitlement over a three-year period, taking into account council tax raised and government support. It would distribute most of the increase in council tax income over the next three years elsewhere in the country, which the council believes is against numerous principles of the proposed objectives of the funding review, and against the objective of devolution and housing/business growth.

The council's response primarily seeks the introduction of a floor of 4% per annum increase in Core Spending Power² (CSP) for local authorities with adults' and children's services responsibilities. If this is not enacted, then a much longer period of transition is requested to allow organisations to plan and manage the impacts and impacts on services. The current proposal of a three-year period will place many councils, including Wokingham, at a very significant risk of having to enact detrimental service impacts on local communities and make short-term decisions that have longer term negative impacts.

There are flaws identified with the proposed formula, and it was also noted that the consultation still does not reference future plans for the Dedicated Schools Grant (DSG), which is currently placing a significant pressure on council finances. The interest associated with these growing DSG deficit continue to be paid for by the council tax payer and there is no recognition of this in the funding formula.

As the proposed approach would have a fundamental impact on the ability of Wokingham Council to fund and support its services, a considerable amount of work has already been undertaken to further the council's case. This has included a letter to MHCLG, meetings with MPs, writing to over 50 Tier 1 local authorities who they think would support their position, and discussions with the Local Government Association (LGA).

The report outlined four priority elements of feedback that are critical to be considered and properly reflected in the future approach:

• Measuring differences in demand and cost: The current arrangements for the allocation of funding is assessed using Relative Needs Formulae (RNF), which estimate the demand in the authority compared to other authorities based on particular characteristics. At present there are 15 different RNFs and they have not been updated since 2013-14. The proposed indicators do better reflect some areas of spend, for instance particularly in respect of adult social care. However, in other areas the proposed data does not reflect local demand and cost at all, with the biggest example being children's services where the proposed approach would indicate a need 50% below the current spend (based on 2023/24 spend).
• Transitional arrangements: The proposal to make such dramatic and fundamental changes over a short three-year period will magnify the issues and mean a catastrophic reduction in services. The report asks for a complete re-think and the introduction of a floor (maximum reduction in funding/resources) to protect councils and their services.
• Financial flexibilities: The report outlines the importance of allowing councils further financial flexibilities in order to assist with the current financial and demand pressures, such as capital flexibilities, council tax cap raising or abolishing the current limit on local increases, council tax banding extending beyond Band H for very large properties, single person discount (council tax) allowing reductions to be set locally to align with local policy, and DSG flexibilities.
• Dedicated Schools Grant: Over a number of years the deficit in local authority funds has risen significantly in most councils across the country. Despite enlisting on the national Safety Valve programme, the deficit continues to rise and current forecasts show Wokingham expects to reach a peak in-year deficit in 2028/29 of £35 million.

The council submitted its response and is continuing to progress a number of communications with central government officers and elected members to ensure the position and impacts are fully understood.

The report stated that the government propose to issue their response and final policy position in a Policy Statement in autumn, followed by the provisional Local Government Finance Settlement before the end of the year.

The report stated that the allocation of fundings through the Financial Settlement is critical to the council's overall financial position and for the appropriate funding of key local services. The proposed approach would have a severe negative impact to Wokingham Borough Council's financial position and therefore would place very significant pressure on the provision of local services and support.

The council's formal response to the consultation is attached as Appendix A to the report.

Councillor Stephen Conway, Leader of Wokingham Borough Council, sent a letter to Jim McMahon MP, Minister of State (Housing, Communities and Local Government), outlining concerns and potential impacts and asking for a further dialogue and response. This letter is attached as Appendix B to the report.