Richmond Council drops legal action after government funding tweak

Key Points

• Richmond Council withdraws plan to take legal action over government’s Fair Funding Review 2.0 proposals.
• Council expected massive funding cuts—up to £45 million annually—but government disputed this figure.
• New government update suggests Richmond will likely receive a cash-flat settlement, protecting core funding.
• Funding changes will phase in gradually over three years from April 2026.
• Government plans to protect most councils facing reductions with a flat cash floor and allow limited council tax flexibility.
• Richmond Council leaders welcome the government’s updated proposals as a significant improvement.
• MHCLG states reforms aim to make funding fairer for councils with higher needs.
• National funding continues to fall; local taxation plays an increasing role in council revenue.

What led Richmond Council to consider legal action against the government?

As reported by LDRS, Richmond Council initially planned to pursue legal action, having sent a pre-action letter to Secretary of State Steve Reed. The council challenged the consultation process underpinning the Fair Funding Review 2.0, a government initiative to redistribute funding among local authorities in England starting 2026/27.

The council feared losing as much as £45 million annually, equivalent to over 90 per cent of its current funding, which it claimed would have made Richmond the worst-affected council in England by proportion of funding loss.

The Ministry of Housing, Communities and Local Government (MHCLG) refuted that figure, stating it did not recognise the £45 million estimate presented by Richmond Council.

How did the government respond to concerns raised by Richmond Council?

MHCLG issued a new finance policy statement indicating that Richmond is now likely to be included in a category of councils receiving a “cash-flat settlement” over the next three years. This approach protects core funding from decline during the transition to the new system, beginning April 2026.

The statement confirmed a phased approach to introducing changes gradually over a three-year period. It further outlined measures to protect most councils previously forecast to experience reductions by imposing a flat cash floor, ensuring no further cuts during the transition. It also hinted at limited scope for council tax flexibility to help councils respond to funding pressures.

What are Richmond Council leaders saying about the government’s updated proposals?

Liberal Democrat Council Leader Gareth Roberts told MyLondon News,

“This announcement shows our concerns have been heard. We have been absolutely clear with government: Richmond needs a fair settlement that protects essential services for the people who rely on them.”

He added,

“I’m pleased that ministers have listened and that the most severe cuts originally proposed will now not be applied – it’s a significant improvement from what was originally on the table.”

Jim Millard, the council’s finance lead and also a Liberal Democrat councillor, said:

“This announcement is a significant improvement on the original proposals and shows the strength of our case to government. But it’s important to be clear: national funding for councils is still falling, and local taxation is playing an ever-larger role in filling the gap.”

He emphasised Richmond’s “ambitious transformation programme” aimed at protecting services and shielding residents from steep increases.

What rationale does the government present for the funding reforms?

According to a spokesperson for MHCLG reported to LDRS, the government is

“committed to fixing the outdated and unfair funding system so funding finally matches local people’s needs and demands on services.”

The spokesperson noted,

“Our reforms will mean people in areas previously left behind will get the vital public services they deserve from their local council.”

MHCLG also stated that it is in the process of preparing a formal response to the earlier consultation on the Fair Funding Review 2.0 and expects to publish this in the coming weeks.

How will the funding changes affect other councils and the wider landscape?

The government’s phased approach and protections signal an intent to ease the impact of the funding formula overhaul broadly across local authorities. The flat cash floor and limited increases in council tax flexibility imply a cautious transition rather than abrupt financial shocks.

However, as Jim Millard highlighted, overall national funding to local authorities continues to decrease, which shifts more of the financial burden onto local taxpayers. This dynamic underscores ongoing challenges facing councils amid austerity pressures and rising demand for public services.

What does this episode reveal about local and central government relations?

Richmond Council’s proactive legal challenge and subsequent withdrawal reflect the complex negotiations between local authorities and central government over fair funding. The government appears to have adjusted policy in response to concerns raised by Richmond and possibly other councils.

Such dialogue hints at the political and financial balancing act required to reconcile national budget constraints with local service needs.