A senior councillor has written to Chancellor Rachel Reeves asking for extra funding – saying that changes to the business rates system will cost his authority £1.5 million.

Newcastle-under-Lyme Borough Council's deputy leader Stephen Sweeney says a 'strict' budget setting process will be needed to address an expected £1.78 million funding gap in 2026/27.

In his letter to Ms Reeves, Cllr Sweeney claims that the government's reset of the business rates retention system will result in the borough council losing out, at a time when demand for services is increasing due to the cost-of-living crisis.

The amount the council spends on temporary accommodation for homeless people increased to £930,000 in 2024/25, equating to 5.4 per cent of its net budget.

Cllr Sweeney says that additional funding will be needed 'to assist towards the pressures faced in order to avoid the council having to again reduce the provision of its core services'. He also invited Ms Reeves to come to Newcastle in order to 'understand the progress we are making and the challenges we face'.

Under the business rates retention system, councils are allowed to keep a portion of the tax collected. But the government says the system needs to be reset in order to better align funding with need.

Cabinet members at the borough council will be given an update on the budget-setting process and the authority's financial pressures when they meet on Tuesday.

Council leader Simon Tagg said: "Since 2018 our annual efficiency reviews have resulted in more than £10 million of budget savings for taxpayers, while focusing on delivering good quality services for residents. We have been expecting this government recalculation of Business Rates to affect us and preparing as best we can so our communities don't suffer the consequences."

Cllr Sweeney added: "In the last financial year the council spent £930,000 on providing temporary accommodation for people made homeless. That's around five per cent of the council's total budget, more than double the figure a couple of years ago, and it's driven by increasing demand and the rising cost of finding somewhere for people to stay.

"We have been dedicated in controlling our costs to ensure value for money, but it's also essential that we receive a fair settlement from central government."

The government says it is in the process of overhauling the 'outdated' way local councils are funded, with around £2 billion being redirected to places with the most need.

Responses to the fair funding review are being considered, and further details will published along with the provisional settlement later this year.

A government spokesperson said: "We have already made over £69 billion available this year to boost council finances and are committed to changing the outdated way they are funded. We will be responding to our consultation on allocating funding more fairly in due course."