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Labour's ‘fair funding' changes to local government have caused plenty of debate over who benefits most from the three-year settlement. Rural or urban? The suburbs or the inner cities?But there has been little said on the funding gaps that may divide neighbouring local authorities, or even opposite sides of the same street.Analysis from public sector consultants IMPOWER has revealed some of the starkest funding faultlines between bordering councils.Individual streets could see one side of the road's Core Spending Power (CSP) fall in real terms while the other's increases by as much as 50%.Jeremy Cooper, executive director of IMPOWER, says: ‘There are lots of significant faultlines, where stepping across a council border takes you from fair funding "winner" to "loser".'This can be seen in many bordering London boroughs, with Hammersmith and Fulham having their CSP fall by 5% between 2025-26 and 2028-29 while their neighbours Hounslow will have theirs rise by 37% over the same period.But it is not limited to the edges of urban centres. In the bordering rural counties of Surrey and Kent, CSP will rise by 1% and 23% respectively between 2025-26 and 2028-29.Cooper adds: ‘For years, most councils have had broadly the same challenge, now the dividing lines are much starker. Some have radical cost reductions to deal with, while others are having to re-learn how to invest well.'He says these distinct neighbourly differences could directly impact council's ability to recruit and retain staff alongside affecting the buying power of authorities for care provision.There are, of course, explanations for many of these funding differences. In Hammersmith and Fulham's case, the Government believes the borough has the capacity to fund itself more through local taxation, with high business rates retention and some of the lowest council tax rates in the country. Put simply, Hounslow does not have the same capabilities.Cooper believes that funding levels may actually not be the dictator of success: ‘It is surprising to hear of negative implications from councils who are funding ‘winners'. They are facing pressure for big spending increases on things that add little value. Some are taking the foot off the gas, off positive transformation they had planned.This is at the crux of the Government's argument: that funding had been similarly skewed amongst neighbours under the previous system, just in a different direction. Some councils with high levels of business rate growth benefited hugely from the introduction of George Osborne's Business Rates Retention Scheme while many of their neighbours did not.The aim of the new system is for areas with smaller tax bases to get more government grants while those with relatively bigger tax bases would get less.It should be noted that the Government's calculations for CSP are predicated on the assumption that council taxes will be raised to maximum levels throughout the next three years, but many councils have complained that the CSP figures don't reflect reality on the ground.Most constituents will not be aware of the changing financial landscape for individual councils, let alone how it has been calculated. What they will be aware of is the quality and provision of services in their area in comparison to those nearby, and this is the political landscape that councils must adapt to.Cooper believes that funding levels may actually not be the dictator of success: ‘It is surprising to hear of negative implications from councils who are funding ‘winners'. They are facing pressure for big spending increases on things that add little value. Some are taking the foot off the gas, off positive transformation they had planned.‘There is a distinct possibility that some of those who are "losers" from fair funding, might have more urgency for improvement and therefore end up doing better than the "winners".‘A key question for the "winners" is how much of the additional money can you invest in a way that gives you a return – specifically how well can you invest in early intervention and prevention.'In this sense, councils would do better to focus on making a success of their own lot rather than the funding gaps emerging across county lines.Cooper warns: ‘Beware looking at your neighbour – you need to do it to understand what impact their funding differential might have on you, but you need to be ready to have a different narrative.'Gabriel Stewart is a freelance journalist

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FINANCE

The funding faultlines that could divide streets

By Gabriel Stewart | 16 June 2026

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