A return to growth that leaves the poorest people and the poorest regions behind is a return that no-one wants to see. But, on the government’s current course, this divide is growing in all areas of the country
In the current climate of ever-depleting resources and an ever more complex funding system, the discussion from those outside of Whitehall feels like a competition for the title of 'most hard done by'. This week’s Rural Communities report from the environment, food and rural affairs committee is another voice in the call for local government finance reform.
This government came into power with three main economic aims: to rediscover growth, reduce the deficit and rebalance the economy. Trying to realise the first two in the context of the latter means that there are clear winners and losers in every policy decision taken. Consequently rural areas are by no means alone in feeling 'underfunded and ignored'.
The evidence from the committee provides plenty of points for agreement across local government, whether rural or urban, north or south, national or local. The statistics included may be open to challenge, but there is a growing consensus around the principles of its criticism.
Local authorities across the country can agree that the sector as a whole has suffered a disproportionate share of the cuts. In both the 2010 and 2013 spending reviews, it has been 35% in real terms.
It is also generally agreed that arbitrary ministerial adjustments to needs-based allocations lead to uncertainty and to mistrust of final allocations. Too often, authorities are asked to sign up to changes in allocation principles only to see those principles made irrelevant by ‘adjustments’ at ministerial discretion.
Rural Communities argues, and urban authorities would agree, for less central political interference and more transparency in the way that final funding is shared. Within this, as those closest to the community, authorities need to play a bigger role in establishing the funding allocation methodology.
Sadly, much of this is currently an academic exercise since funding allocations are set until 2020. Again, most local authorities agree that the ‘reset period’ for reviewing allocations is too long and would welcome some flexibility in the way the needs-based allocations have been set; we don't wait with bated breath.
However, the Rural Communities report does need further scrutiny before some of its claims are swallowed whole. The worth of comparitive figures quoted for spending per head are very difficult to assess because of the structural differences between districts, counties and metropolitans.
In addition, the sparsity factor is frequently identified by those campaigning for a fairer deal for rural areas. Government asked for some 'solid evidence' on the measurement of this. The sparsity factor adjustments included as part of the Business Rates mechanism was not universally accepted. There is as yet no generally accepted formula for evaluating the additional costs associated with sparsity. Whilst sparsity is not the only determinant of costs, there are other issues such as complexity and congestion.
The Rural Communities report criticises the ‘semantics of spending power’. Again, all authorities would welcome some clarity around the governments headline figure for ‘total spending power’, which, it is claimed, shows a real-terms reduction of just 2.3% for local government.
A wider view is needed, however. For example, district and county councils have tended to benefit from New Homes Bonus payments (which is funded mostly by raiding formula grant), whilst urban areas outside of London lose out significantly, as shown by the National Audit Office report in March this year.
Neither is the impact of welfare reform included in the assessment of the status of rural areas. Welfare reform will take an estimated £16bn per annum out of local economies by 2014-15. The regional impacts of welfare reform needs to be considered for a full assessment.
Our economy is fundamentally unbalanced. The division that is growing does have an identifiable geographic imbalance, but the main issue is one of inequality between the well off and the poor. A return to growth that leaves the poorest people and the poorest regions behind is no return that anyone wants to see. Unfortunately, on the current course this divide is growing in all areas of the country.
For a balanced economy with a sustainable future, economic 'growth' needs to be seen as one goal of economic 'development'. By pursuing this goal, whether north or south, rural or urban, in London or outside London, economic localism can be the policy that achieves new levels of social inclusion.
Rob Newton is principal policy officer for the Special Interest Group of Municipal Authorities
