Councillor Phil Jordan, Leader of the Isle of Wight Council, shares this latest news. Ed
To all of our Island residents and businesses
Over recent weeks I’ve been in daily contact with our Labour MP, Richard Quigley, about the Island’s funding position. He has taken our case directly to senior Ministers and put the facts of Island life and Island costs squarely in front of them.
Conservative MP Joe Robertson is also supporting this effort and will be raising further questions in Westminster in the weeks ahead. We are united in pressing Government to understand and address our situation.
Funding cuts since 2010
This challenge did not appear overnight. Since 2010, national austerity measures have reduced the Isle of Wight Council’s core Government funding by about £100 million per year compared with 2010 levels. Over the same period, we’ve reduced our workforce by over 600 posts, leaving us focused almost entirely on statutory services—the services the law requires councils to provide.
The recent Fair Funding Review did not fix our financial predicament. In fact, it left the Island worse off. The funding formula does not properly account for the Island premium—the higher costs and practical realities of delivering services on an Island separated from the mainland. Government currently applies a measure of “remoteness” narrowly, mainly in social care, which simply doesn’t reflect the totality of our circumstances.
Here’s the picture in simple terms:
- Roughly 50% of our income comes from Government; the other 50% from Council Tax and Business Rates (the latter is shared 50/50 with Government).
- When Ministers say councils’ resources are “increasing,” they often refer to Core Spending Power—which includes an assumed 5% Council Tax rises each year for the next three years.
- On paper, our Core Spending Power might rise by about 6% over three years—but our direct Government funding is actually set to fall by £13 million in that same period.
- With inflation around 4.5% a year, a 6% rise across three years doesn’t cover rising costs, especially when demand is increasing.
Two‑thirds of the Council’s entire budget is spent on adult and children’s social care. Demand is rising steeply. This year alone, adult social care is spending around £8 million more than budgeted simply because more people need help. These are statutory duties—we must provide them. We have to pay for them.
We have been responsible and prudent. Over the past five years we have driven new borrowing down to near zero, allowed historic loans to mature rather than replace them, and sold surplus assets carefully. But capital can only be spent once; you can’t sell the same asset twice. Meanwhile, operating costs for statutory services continue—often rising faster than our resources.
Following sustained pressure, we now have written acknowledgement from officials that Isle of Wight funding is falling, rather than rising as implied by Core Spending Power. This is a crucial step, but we need action, not just acknowledgment.
We are continuing to make the case for around £24 million per year that our Island needs simply to deliver the same statutory services as comparable mainland councils. In the meantime, as 30 councils did in 2025, we have applied for Exceptional Financial Support (EFS). EFS is not a grant; it permits councils to borrow to bridge a structural gap. For us, that gap over three years is £55 million. Servicing that borrowing would cost around £4.6 million a year for 20 years—roughly £94 million repaid in total. That is not a sustainable solution; it simply pushes costs forward onto future residents.
Our aim is to avoid a Section 114 Notice—the formal step that declares a council unable to set a legal budget and typically invites Government Commissioners to take over financial decisions. We are doing everything in our power to prevent that outcome.
We will keep statutory services going, protect the most vulnerable, and be open with you about the trade‑offs. We will continue to push for fair treatment—recognition of our Island’s uniqueness, a funding formula that matches reality, and the resources we need to deliver the services you rely on.
The ball is now firmly in the Government’s court. We will keep you updated, involve you in decisions, and do what’s right for the Island.
Some key facts
- Core Government funding down £100m in total vs. 2010
- Workforce down 600+ posts since 2010
- Direct Government funding: Minus £13m over the next three years
- Core Spending Power: +6% over three years (but assumes +5% Council Tax rise each year)
- Inflation: plus 4.5% annually
- Social care: Two thirds of total budget; £8m in‑year adult social care overspend due to demand
- Structural financial gap: £55m over three years; EFS debt servicing £4.6m/year for 20 years (approx. £94m)
- Ask to Government: £24m/year Island recognition to deliver statutory services at parity with mainland councils
Our next steps
- Continue engagement with Ministers and officials on specific Island‑appropriate funding
- Maintain statutory services and protect the most vulnerable
- Publish regular updates and involve residents and businesses in wider budget decisions
Some key questions and answers
What’s happening and why now?
Because of the recent settlement and Fair Funding Review, our direct Government funding will fall by £13m over three years. At the same time, demand—especially for legally required social care—is rising faster than our resources.
Why do Ministers say funding is going up?
They’re talking about Core Spending Power, which assumes councils raise Council Tax by 5% each year. That’s not the same as Government grant.
What’s the difference between Core Spending Power and actual funding?
See comparison table below—but in short: Core Spending Power includes Council Tax and other local income plus assumed rises; direct Government funding is the grant we receive from Government.
How much is social care costing?
About two‑thirds of our budget. This year, adult social care is £8m over because more people need help. These services are statutory—the Council must provide them.
Why can’t you just cut “back‑office”?
We’ve already reduced our workforce by 600+ posts since 2010 and focused on statutory services. There’s limited scope left without affecting legal duties and frontline protection for vulnerable residents.
Why not sell more assets?
We’ve sold surplus assets carefully. But capital is one‑off—it can’t fund day‑to‑day running costs repeatedly. You can’t sell the same asset twice.
Why not raise Council Tax even more?
There are legal and practical limits. Government assumes +5% a year in its figures. Even with that, rising demand and inflation outpace resources. We’re mindful of the strain on household budgets.
What is Exceptional Financial Support (EFS)?
It’s not a grant. It permits borrowing to cover a structural gap—for us, £55m over three years—which would cost £4.6m per year for 20 years (£94m total). It’s a last‑resort bridge, not a solution.
Is this a bailout?
No. EFS is debt that the Council—and therefore residents—must service for decades.
What is a Section 114 Notice?
It’s the formal declaration that a council cannot set a legal budget. Government usually appoints Commissioners who take over financial decision‑making. We are working hard to avoid this.
What has the Council already done to be prudent?
- Reduced borrowing to near zero; allowed old loans to mature
- Sold surplus assets prudently
- Focused services on statutory duties
- Continuous savings, efficiencies, and better purchasing where possible
What do we want Government to do?
Recognise the Island premium and provide around £24m per year so the Isle of Wight can deliver statutory services at parity with comparable mainland councils.
Will my service change?
We will prioritise statutory services and the most vulnerable. Where changes are proposed, we will consult and communicate early and clearly.
Do you still have reserves?
Reserves are limited, largely earmarked, and by definition one‑off. They cannot sustainably fund ongoing pressures.
How can residents and businesses help?
- Take part in consultations and budget engagement
- If you can, pay Council Tax by Direct Debit and on time
- Check if you qualify for Council Tax Support or business reliefs
- Share your views with local representatives, including your MPs
- Work with us on prevention and early help—small interventions reduce costly crises later
What’s the timeline?
- Immediate term: engage Government and finalise budget options
- This year: seek EFS (if required), protect statutory services, publish regular updates
- Medium term: continue the case for Island‑fair funding and formula change
How will you keep people informed?
Regular public updates via the Council website, social channels, media briefings, and (where helpful) public meetings.
What about Business Rates—don’t those help?
They do, but they’re shared 50/50 with Government and are sensitive to local economic conditions.
What about inflation?
With 4.5% annual inflation, a 6% Core Spending Power rise over three years doesn’t cover rising costs—especially with higher demand.
Is there a role for our MP’s?
Yes. Richard Quigley and Joe Robertson are actively raising Island issues in Westminster. We’re grateful for their support and will continue working with them cross party for the benefit of our Island.
Comparison tables
Core Spending Power Direct Government Funding What it is A broad headline measure including Council Tax and other income The grant we receive directly from Government Includes assumed rises Yes — assumes +5% Council Tax p.a. No What it shows Theoretical spending capacity Actual Government financial support Current effect (IWC) +6% over three years (on paper) -£13m over three years (in reality) Limitation Can mask real‑terms cuts when demand and inflation rise Shows the true change in national support Exceptional Financial Support (EFS) Bailout What it is Permission to borrow to bridge a gap Grant/extra funding from Govt Repayment Yes — debt serviced over 20 years Not applicable For IWC case £55m over three years; £4.6m/year servicing; £94m total Not on offer Suitable for Short‑term stabilisation where reform is forthcoming Long‑term gap where grant is needed Bottom line Buys time, adds debt Solves gap, no extra debt
