The Cost of Cuts, The Power of Innovation: A Council Leader’s Response to Crisis

In the corridors of local government, where policy meets people and budgets meet reality, a quiet but urgent crisis is unfolding. It’s not the kind that grabs headlines or dominates the evening news, but it is one that will shape the lives of millions. At the heart of this challenge is a fundamental question: how do we fund local government fairly, sustainably, and intelligently?

Councillor Elizabeth Campbell, Leader of the Royal Borough of Kensington and Chelsea (RBKC), is one of the most vocal and visionary figures confronting this question. Her borough   one of the most diverse and complex in the country  is facing a perfect storm: unprecedented funding cuts, rising demand for services, and a housing crisis that continues to deepen. But this is not just a story of crisis. It is also a story of courage, creativity, and community. It is a call to central government to rethink the pace and structure of funding reform. And it is a blueprint for local authorities across the UK to reimagine how they use their resources   including their pension funds   to deliver real, lasting change.

Part One: The Cost of Cuts

A Funding Formula That Misses the Mark

The government’s proposed “fairer funding” model for local government finance is, in Councillor Campbell’s words, anything but fair for London. While the intention to rebalance funding across the country is understandable, the execution risks undermining the very councils that support some of the most complex and costly services. RBKC is facing an £83 million cut over the next three years. When demographic pressures, inflation, and rising demand are factored in, the total budget gap balloons to £112 million. These are not abstract figures   they represent real services, real staff, and real residents.

“The government is holding this cut like a sword of Damocles over our heads,” Campbell warns. “It’s absolutely bonkers.”

The proposed changes are not only deep but dangerously fast. Councils will receive confirmation of their funding in January and must set their budgets by February. That gives local authorities just a few weeks to make decisions that will affect thousands of lives and livelihoods.

Ignoring the Real Cost of Living

One of the most glaring omissions in the new formula is the failure to account for housing costs. London’s housing market is among the most expensive in the world, and yet the formula treats it as if it were on par with rural areas.

“If you take housing costs out, London ranks about seventh in deprivation. But if you put them in, we’re at the top,” Campbell explains.

Temporary accommodation alone costs London councils over £1 billion annually. Yet the formula allocates just a 1.8% weighting for this   compared to a 20% uplift for rural remoteness. This imbalance is not just unfair; it’s unsustainable. The formula also fails to reflect the true cost of supporting children and young people. London stands to lose £1.5 billion due to changes in the children’s services formula   a move that disproportionately affects boroughs with high levels of child poverty and complex needs.

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Political Isolation, Cross-Party Collaboration

As the only Conservative council leader in central London, Campbell acknowledges the political challenge of being heard. But she’s not standing alone. She’s working cross-party, engaging with MPs from across the political spectrum, and urging central government to listen.

“The proof will be in the pudding either they’ll tweak the formula, or we’ll face catastrophic cuts that don’t reflect the complexity, cost, or contribution of inner London.”

Her message to Westminster is clear: don’t take London for granted. The capital contributes disproportionately to the national economy. It deserves a funding model that recognises its unique challenges and its vital role in the UK’s prosperity.

Part Two: The Power of Innovation

A Groundbreaking Use of Pension Funds

While fighting for fairer funding, RBKC is also leading the way in innovation. In a pioneering initiative, the council is using its pension fund to tackle the housing crisis   a move that could transform how local authorities think about their assets. The concept is simple but powerful: the council’s pension fund will invest £100 million to purchase 250 homes for homeless households. The council will lease and manage the properties, providing safe, stable, and affordable housing   all at no additional cost to the taxpayer.

“There’s nothing really temporary about temporary accommodation,” Campbell says. “People can wait 11 to 15 years for a family home. This gives them stability.”

The initiative is made possible by recent government guidance allowing pension funds to invest up to 5% in local projects. But what sets RBKC apart is how they’ve framed the investment. “Don’t think of it as property. Think of it as a financial instrument,” Campbell explains. “It’s about steady, bond-like returns for the pension fund   and homes for people who need them.”

Financial Integrity Meets Social Impact

The model is designed to be financially sound. Housing benefit payments cover the lease costs, ensuring the pension fund receives a reliable return. It’s a win-win: the council reduces its £5 million annual overspend on temporary accommodation, and pensioners’ investments remain secure.

“You can’t ransack your pension fund to buy houses. It has to be properly secure, properly planned,” Campbell emphasises.

The success of the initiative hinges on strong leadership, financial acumen, and a “can-do” attitude   qualities that RBKC has cultivated in the wake of the Grenfell tragedy. The council has worked closely with its pension fund chair, officers, and legal advisors to ensure the model is robust, replicable, and resilient.

A Blueprint for Others

RBKC is already in discussions with other London boroughs to share the model. The goal is to create a scalable, replicable framework that other councils and pension funds can adopt.

“If we can get it right, there’s no reason others can’t emulate it,” Campbell says. “It’s about sharing best practice   and London is good at that.”

The potential is enormous. If even a fraction of the UK’s local government pension funds followed suit, thousands of families could be lifted out of temporary accommodation, and councils could regain control over spiralling housing costs.

The Human Impact

Beyond the numbers, this is about people. Families forced to move three or four times while waiting for a permanent home. Children pulled from schools. Parents unable to find stable work. The RBKC model offers more than housing   it offers dignity, stability, and hope.

“We’ll be able to buy small blocks, maintain quality, and give people a real chance to build their lives,” Campbell says.

It also fosters community cohesion. Stable housing allows residents to invest in their neighbourhoods, build relationships, and contribute to the local economy.

A Call to Central Government

This blog is a direct appeal to policymakers in Westminster. The message is urgent and unequivocal:

1. Revisit the funding formula: Account for housing costs, temporary accommodation, and the unique pressures of central London.

2. Slow the pace of change: Councils need more than a few weeks to respond to seismic shifts in funding.

3. Empower local innovation: Allow councils to retain more of their business rates and reinvest in their communities.

“We’re happy to contribute to the rest of the country of course we are. But don’t cut us off at the knees.” The government must also recognise the value of local leadership and innovation. Councils like RBKC are not waiting for handouts they are finding solutions. But they need the tools, time, and trust to deliver.

A Message to Local Government Leaders

To fellow council leaders, finance directors, and pension fund managers: this is your moment. The RBKC model proves that innovation is not only possible it’s essential.

• Think differently: Reframe assets like pension funds as tools for social good.

• Collaborate: Share models, data, and lessons learned.

• Act boldly: The challenges are great, but so is the opportunity.

“We’ve had to learn the hard way. But now we’re resilient. And we want to help others do the same.”

This is not about competition it’s about collective progress. The housing crisis is national. The solutions must be, too.

Conclusion: From Crisis to Catalyst

The story of Kensington and Chelsea is one of contrasts: deep cuts and bold ideas, political isolation and cross-party collaboration, financial strain and social innovation.

It’s a story that should inspire both caution and courage. Caution for central government, to reconsider the speed and structure of funding reform. Courage for local authorities, to reimagine what’s possible with the tools they already have.

Because in the end, as Councillor Campbell reminds us:

“The clue is in the name: public service. We’re here to serve and we’ll keep finding ways to do that, no matter what.”

This blog post was sponsored by RPNA, who help local authorities to deliver projects and implement changes efficiently. They offer expertise in areas like leadership, wellbeing, technology, and commercial acumen, ensuring excellent value for money and meeting key priorities.