London children could be left without adequate support

Joint analysis from the National Children’s Bureau and Public Alchemy, commissioned by the cross-party London Councils group, has discovered “serious issues” with the proposed Children and Young People’s Services (CYPS) relative needs formula, leading to questions around its robustness and accuracy.

These proposals are part of the broader reform of council funding allocations (Fair Funding Review 2.0), which is due to implemented in 2026-27, and will change how funding will be distributed to local authorities.

The National Children’s Bureau and Public Alchemy research found that the draft formula had questionable robustness and accuracy, and measures deprivation through the Income Deprivation Affecting Children Index (IDACI), which does not account of housing costs. This is a key detail that is a particular concern for children in London. 

The new formula assumes that London’s need for children’s services has decreased by almost 40 per cent, even though boroughs have overspent on children’s services budgets by more than £150 million for both of the previous two years. London Councils thus estimates that the overall impact of these proposed reforms will cause boroughs to receive £700 million less than they would under current funding arrangements.

Councillor Claire Holland, chair of London Councils, said: “We welcome the government’s intention to reform council funding since this is long overdue, and it is critical that funding is distributed fairly and efficiency on the basis of need.

“However, it’s clear there are serious issues with the proposed children’s services formula, which risks dramatically underestimating levels of need in London and other parts of the country. This would have a devastating impact on our ability to deliver vital local services, particularly for our most vulnerable children and young people.

“A more accurate approach to assessing local levels of need is everyone’s interests. It will help create a funding system that is robust, provides councils with the resources they need and—following 14 years of structural underfunding—restores long-term financial stability to boroughs and the wider local government sector.

“The consultation is an essential opportunity to re-examine the formula, and we are keen to work with the government to develop a model that is accurate and robust.”