Text from a letter sent this week to Rt Hon Andy Burnham, MP Prime Minister; Rt Hon John Healey, MP Chancellor of the Exchequer; Rt Hon Angela Rayner, MP Secretary of State for Housing, Communities and Local Government.
The letter was co-signed by Cllr Mike Ross, Leader of Hull City Council; Cllr Daren Hale, Group Leader Labour Group; Cllr Richard Kelly, Group Leader Reform UK Group.
Dear Prime Minister, Chancellor and Secretary of State
Hull City Council – Financial Settlement and Fair Funding 2.0
We write to you to outline our concerns in relation to the imminent Local Government
Financial Settlement update for 2027/28 and following Fair Funding 2.0 (FF2.0). It is vital
that the 2027/28 Financial Settlement update, anticipated in November 2026, works to
address the disparity created by the Fair Funding 2.0 methodology outlined within the
three-year settlement and also reflects the current rates of inflation following ongoing
economic instability.
The original FF2.0 funding ambitions planned to ensure Local Government funding
aligned to areas of High Need and Deprivation whilst also seeking to address structural
imbalance of the Local Tax Base. For Hull, as previously designated, we were the 4th
most deprived authority in England, and, therefore, the government principles behind
FF2.0 were outlined to ensure organisations, such as ours, would clearly see a
demonstratable improvement in our financial sustainability.
However, FF2.0 throughout Summer 2025 was transitioned from its original focus and
intentions to, instead, enable funding distributions to move away from the most deprived
authorities in the north towards London based authorities, through inclusion of additional
IMD measures for Housing. This led to Hull moving from 4th Most Deprived to 6th Most
Deprived and, subsequently, a reduction in our potential funding allocation.
The table below outlines the original FF2.0 allocation potential for Hull City Council versus
the final settlement position:
| 26/27-28/29 Settlement | Core Spending Power % Increase | Movement from original modelling* |
| FF2.0 Original Consultation Modelling | 19.67% | |
| FF2.0 Provisional Settlement | 16.19% | -£12.5m |
| FF2.0 Final Settlement | 16.85% | -£10m |
*Please note the movement between provisional and final settlement was due to the late addition of further recovery grant funding and not additional baseline CSP.
This analysis clearly demonstrates the £10M reduction in funding from the original FF2.0
allocation potential to the FF2.0 final allocation.
To contextualize this in real terms, Hull City Council at Period 5 is reporting a projected
overspend of £8.3M with specific demand led pressures of £3.6M and £6M in Adult Social
Care and Children’s Social Care respectively. These are service areas that have seen
substantial financial investment in reshaping services through focused transformation
programmes, including substantial investment in ‘in-house’ children’s homes and award-winning ‘Grow you Own’ Social Worker workforce academies, alongside millions of inflationary and demand budget uplifts. Alongside this, the Council has delivered over £170m of efficiency savings since 2010, with almost a fifth of these savings achieved in the last 4 years.
The Local Government Association identified a substantial and growing funding gap
facing local government over the coming years. This includes a £2 billion funding gap this
year, rising to £4.3 billion in 2027-28, and £7 billion in 2028-29. This demonstrates that,
whilst the settlement was welcome, the later deliberate changes to the formula means it
does not fully close the gap between rising demand and available resources.
At the same time, funding growth is becoming increasingly dependent on Council Tax.
SIGOMA analysis shows that, whilst Council Tax accounted for 57% of Core Spending
Power growth in 2026-27, this rises, dramatically, to 84% in both 2027-28 and 2028-29
and the overwhelming majority of additional funding available to councils over the
remainder of the settlement period is expected to come from local taxpayers rather than
central government. As you will understand, Hull and places like us have a much lower
Council Tax base than the many areas who were advantaged by the late changes to Fair
Funding formula and can never close this financial gap by continuing pressure on our
residents through this outdated and inappropriate approach.
The change to the local government funding formula, FF2.0, led to a reduction in funding
weighting across all measures for Hull City Council, excluding CYP. More specifically,
there was an alarming 15.1% reduction in Hull’s funding allocation weightings for Adult
Social Care within the formula. In assessing the significance of this, it needs to be
understood that, in stark contrast to most local authorities, Hull is responsible for the care
costs of over 89% of our residents, due to their comparative low incomes. This reduction
highlights a clear disconnect within formulas for the RNF’s and the alignment to
deprivation.
More importantly, it also outlines a clear example of where national funding distribution for
Adult Social Care has been reduced, due to this intentional change for Housing
measures, compared with a required £11m demographic and inflation investment to ASC
budgets for 2026/27 in Hull; budgets which already demonstrate an early overspend as
noted above. The impact of such funding changes cannot be underestimated in our city
as we see ever increasing demand and complexity for ASC amongst individuals under the
age of 65.
Additionally, for our Children and Young People services, whilst the funding formula noted
an increase in allocation to Hull, the overall funding calculation was insufficient as it did
not use the most up-to-date available spend data for Children’s Services. By using out of
date data this has led to local authorities seeing ever increasing spending, in an
underfunded and profiteering sector, to face unacceptable cost increases outside of
anything close to those seen, or anticipated, when the FF2.0 formula was set. Ultimately,
it appears that Hull, and councils with similar profiles to ours, have been set up to failure
from the outset. This is despite the fact that Hull City Council have led the sector in
relation to mitigating these costs through establishing our own Children’s Homes, (we now
operate 17 of various sizes), avoiding the need in many cases for exposure to the “wild
west” of unregulated market-driven rates of the children’s placement sector. Even these
actions could not prevent the impacts reflected in our latest, Period 5, forecast.
Therefore, we write to you to reiterate our major concern that the Local Government
Financial Settlement and FF2.0 has not delivered the Government’s stated ambitions for
redressing the previous settlement’s inequities, and, instead, continues the structural
underfunding of places such as Hull, who have borne the vast brunt of austerity and its
dogma-driven funding cuts over the last 12 years. This, once again places the burden
back on our local taxpayers which is untenable and will not ensure financial sustainability.
As a regional Mayor for many years, we are sure you will appreciate this context and will
not want to be party to continuing with the previous Government’s politically-driven
funding bias.
Reflecting this, we ask that, as a matter of priority, this is acknowledged and rectified
within the updated 2027/28 Local Government Financial Settlement inflationary uplift,
Recovery Grant allocations, and into our financial baselines and future settlement
modelling, post this current 3-year agreement. We would appreciate the opportunity to
discuss this with you and your team at your earliest convenience.