The leader of Leicestershire's authority - and Coalville district councillor[.L] - Nick Rushton has called for a change in the way that councils are funded – labelling the current system 'comprehensively broken'.

The Leader of Leicestershire County Council has published an article on the Conservative Home website outlining the faults in the current system of local government funding which he says has resulted in a 'risk of collapse for some authorities'.

Leicestershire recently revealed that it will likely need to borrow around £166 million to meet its expenses between now and 2025.

Currently, local councils receive their funding from a variety of sources, including central government grants, taxes such as council tax and business rates, and through the sale of assets or the borrowing of money.

Cllr Rushton said: "Local government funding is comprehensively broken.

"Allocations today are still linked back to historic spending levels – rewarding those who spent the most on services decades ago.

"This means that taxpayer funding is increasingly badly matched to demand and need, exacerbating existing imbalances between different places."

The Government promised a review of local council funding, but this was put on hold due to the Covid-19 pandemic.

"When it is complete the Fair Funding review will establish new baselines of funding for each authority.

Cllr Rushton said the current data used by the Government to determine the level of funding received by each council has not been updated since 2013.

He added that much of it is older than that.

A key example is Council Tax bands. These are still based on property values from 1991, meaning they do not reflect the current value of a house.

He added that the use of targeted grants 'weakens resilience in the system'.

Cllr Rushton said: "According to the Local Government Association, of the approximately 250 grants issued to councils each year between 2016 and 2019, over one-in-three were discontinued from one year to the next.

"This is no way for councils to plan for the long-term. These smaller grants are reactive, responding to crises that have already emerged and become entrenched."

Cllr Rushton acknowledged that the pandemic has paused the progress of the review, which should have been completed last year, but insists temporary measures should be put in place to help cash-strapped authorities recover from the financial cost of the pandemic.

He said: "These problems are so deep-rooted that a comprehensive rethink is needed, which the Government has already committed to through the Fair Funding review of local government finances.

"Understandably, this review has slipped due to the disruption caused by coronavirus. But as we emerge from the worst of the pandemic, it is imperative that the Government grasp the nettle once again.

"For now, the Government could introduce an interim measure to level up local authority funding to a more sustainable level.

"If a fixed sum of additional funding was made available, this could be directed at pulling up those authorities with low core spending power per head closer to the national average.

"Setting this floor at 90 per cent of the average core spending power of local authorities, we have estimated the costs of this to be £300 million a year. Around 30 of the poorest local authorities, mainly based in the Midlands and the North of England, would benefit from the change."

He added that, while this would help in the short-term, it should not be considered a permanent solution.

"Although this proposal for a funding floor would create more resilience in local government finances, again, this stop-gap measure should not replace the wholesale reform of the comprehensive Fair Funding review in due course."