Isle of Wight Council Warns of £13m Funding Loss and Budget Crisis

The leader of the Isle of Wight Council has warned the authority could face a £13.4 million reduction in government funding over the next three years, raising concerns about its ability to set a balanced and lawful budget.

Alliance group leader Councillor Phil Jordan wrote to Local Government Minister Alison McGovern MP on Friday 9 January, requesting an urgent meeting to discuss what he described as the “real and imminent” financial risks facing the council.

The warning follows the government’s Fair Funding Review 2.0 consultation, published in June, which proposes significant changes to how grant funding is distributed to English local authorities.

A provisional Local Government Finance Settlement for the period 2026/27 to 2028/29 was later published on 17 December, setting out central government funding allocations for councils.

In his letter, Councillor Jordan said the outcome of the review would leave the Isle of Wight Council in a “substantial and materially worse” financial position, with a projected loss of £13.4 million over three years.

He said the Island’s unique circumstances mean changes to the funding formula have had a disproportionate impact, pointing to higher service delivery costs caused by physical separation from the mainland, limited economies of scale and ongoing workforce challenges.

Councillor Jordan described these pressures as “structural, enduring and unavoidable” and said the current settlement fails to properly recognise them.

The council’s own financial assessment also shows a projected budget gap of £22.7 million in 2026/27, rising to £44 million by 2028/29.

Speaking in the House of Commons in November, Local Government Minister Alison McGovern MP said the government was committed to creating a fairer funding system for local authorities.

She said some councils had benefited disproportionately under the current system and that reforms were needed to ensure poorer authorities, which are less able to raise income through local taxation, receive the funding they need.

Independent councillor for East Cowes, Karl Love, criticised the outcome of the Fair Funding Review, saying it had resulted in a £3.8 million reduction in the Island’s expected budget this year.

He said the Island’s small size limits its ability to generate income and warned that without additional support, the council would struggle to set a budget.

Councillor Love called on government to step in with either a revised funding settlement or an Island-specific deal, adding that pressures on adult social care budgets are continuing to place significant strain on council finances.