Council tax bills are set to rise in the south to fund the north, according to reports. Deputy Prime Minister Angela Rayner will set out plans for a “progressive” redistribution of local authority funding from central government.

She will unveil a new formula aimed at allocating the money to areas depending on local needs, according to The Times. The changes are expected to lead to a drop in cash for wealthier councils, mainly in London and the South East, forcing them to raise council tax or cut public services to make up the shortfall.

Around half of council incomes currently come from Government grants.

Ms Rayner will reportedly cite discrepancies in council tax levies between richer and poorer areas.

But a senior figure in local government warned the move would be “deeply divisive”.

They said: “There is no doubt at all that it is going to be polarising. For a lot of councils in richer parts of the country the current system works quite well for them and they’re going to lose funding.

“A lot of councils in rural areas are also worried that they will see their funding diverted into deprived urban areas.”

David Phillips, of the Institute for Fiscal Studies, insisted reform was overdue.

He said: “It’s been 20 years since we’ve had an effective system to allocate funding between councils so it is out of whack and the changes are going to be big.”

A spokesman for the Ministry of Housing, Communities and Local Government said the current system had seen “perverse outcomes, where some authorities are struggling to provide basic services whilst others are better off”.

The spokesman said: “Individual councils remain responsible for setting their own council tax levels each year, and the government is clear that they should put taxpayers first.”