Birmingham City Council has emerged as a significant beneficiary following the Government’s announcement of increased funding for councils serving the most deprived areas of England. As part of a landmark multi-year financial settlement unveiled in the House of Commons on Wednesday, December 17, Birmingham will receive millions in additional resources to support key local services.
This financial boost marks a turning point for the council, which continues to recover from its near-bankruptcy declared two years ago. The Government’s £78 billion funding injection over three years strategically targets the areas with the greatest need, emphasizing support for deprived communities over more affluent regions.
Council leader Cllr John Cotton welcomed the announcement, highlighting that by 2029, Birmingham’s funding will have grown by 45%—equating to an extra £651.5 million over five years. He stated, “This is the end of councils living hand-to-mouth. After 14 long years of Conservative austerity cuts, we now have a Labour government investing hundreds of millions into Birmingham—not just this year, but for the years ahead. This allows us to properly fund services that truly impact our communities, whether it’s maintaining clean streets or investing in libraries."
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The multi-year funding settlement is the first of its kind in a decade. Under the revamped funding formula, nearly half of councils (43%) will experience funding reductions in real terms over the next three years, notably affecting many shire districts and inner London boroughs. In contrast, Birmingham stands out as a major winner, alongside other major city councils and outer London boroughs.
For the fiscal year 2026-27, Birmingham is set to receive £1.103 billion in total funding, which includes £1.019 billion in baseline funding, £427.1 million in tariff/top-up payments, and £83.8 million earmarked for better care services. This funding assumes the council will implement the maximum allowed council tax increase of 4.99%, combining to form a substantial portion of the city’s spending power.
Birmingham City Council’s prior financial struggles stemmed from rising service demands, a costly failed Oracle IT project, loss-making investments, and equal pay liabilities. Officials are currently preparing the draft budget for the upcoming year, with this funding announcement offering critical relief to achieve a balanced and lawful budget plan.
Local MPs welcomed the funding package. Birmingham Edgbaston MP Preet Kaur Gill emphasized the necessity of the support after years of austerity, while Home Secretary Shabana Mahmood, MP for Birmingham Ladywood, condemned the previous decade’s cuts for severely damaging local services. She commented, “Today is a good day for Birmingham, and I will never stop fighting for our city and my home.”
Other regional councils are also beneficiaries. Sandwell, ranked the fifth most deprived borough nationally, will receive additional funds, with Tipton and Wednesbury MP Antonia Bance underscoring the importance of restoring support to deprived areas.
Secretary of State for Levelling Up Steve Reed described the funding as a fresh opportunity to reverse years of cuts and reinvest in libraries, youth services, clean streets, and community hubs. Local Government and Homelessness Minister Alison McGovern reinforced that the funding specifically targets deprivation, addressing historic underinvestment and providing local councils with resources to rebuild essential community services.
The settlement also introduces changes encouraging local growth, allowing councils to retain all council tax revenues from new housing developments. The £600 million Recovery Grant, launched last year, will continue throughout the three-year settlement to support the hardest-hit areas.
While the announcement was widely praised, some voices expressed concern. Housing, Communities and Local Government Committee Chair Florence Eshalomi called for comprehensive council tax reform, criticizing it as regressive. Shadow local government minister David Simmonds sharply criticized the settlement, labeling it damaging and inadequate in serving its purpose.
Minister Alison McGovern reiterated that deprivation results from systemic failures over many years and praised the new funding formula for dramatically increasing the weighting given to deprivation—from 25% to 75%—while also considering other factors such as coastline, road mileage, and visitor numbers.
Some rural representatives remain concerned the funding formula does not fully account for the unique cost pressures in countryside service delivery.
Overall, the funding deal represents a milestone in restoring local government finances, empowering Birmingham and similar councils to better serve their communities after years of financial hardship.