When the government published its Fair Funding Review consultation document for councils in England at the end of June, it was hailed as “the next, crucial step towards a fairer, simpler funding system that targets money where it is most needed, to the benefit of working families”.
For its part, the Local Government Association was welcoming, saying: “An opaque funding system has weakened councils’ financial sustainability and vital public services.”
It added: “Different councils will have contrasting views on these proposals. Individual councils will need to know the implications and a transitional mechanism is crucial to avoid putting services at risk.”
Certainly, those views will be contrasting, depending on whether councils feel their unique needs have been recognised by the new formulas or not. Unanimity may be achieved, however, when considering that the formulas ought this time to be kept up to date – for the simple reason failing to update them was one of the principle drivers for the review in the first place.
Winners and losers
Some possible winners and losers began to emerge. Jonathan Werran, chief executive of the think-tank Localis, suggests that, given that the updated formulas are based on the need to improve, some northern metropolitan councils, London boroughs and those in the greater South East, as well as parts of the West Country, may be feeling a bit downhearted at what it will mean.
“That’s especially true in London,” he says, reflecting on a Localis panel at the LGA conference focused on employment support. “London boroughs may feel short-changed about the fact that the review doesn’t take into account disposable income but rather is based on gross income. Given the fact that rents, mortgage payments and the rest are far higher in London and the greater South East, that leads to lower disposable incomes which may not be recognised in the formulas.”
Meanwhile, some councils may benefit in some unexpected ways. Take for instance home-to-school transport, where the government is feeling pressure from councils to recognise growing needs, especially when SEND is factored in. The FFR explains that “the cost drivers for [home-to-school-transport] are varied and can differ from one local authority to the next, but at their core are based on pupil populations and the distances travelled to school”.
With that in mind, a big county such as Kent, even though the weight for a new HTST relative needs formula is relatively small at 3.2, the council would receive a large need share of 4.4%.
Keeping up to date
However, some councils – again in London and the South East – may be dismayed at the decision to use the Index of Multiple Deprivation in the foundation formula for assessing issues such as temporary accommodation. Many running these councils may view that particular index as a way of highlighting and assessing the type of deprivation more associated with traditional ‘Northern decline’ areas than it does with London or cosmopolitan areas. Time will tell whether London council leaders will raise this as the consultation continues.
Similarly, whether rural councils dismayed at the removal of the Rural Services Delivery Grant last year will be reassured by the inclusion of two new factors – accessibility and remoteness – into their Area Cost Adjustment calculations remains to be seen.
But there are some crumbs of comfort for those councils fearful of a real terms cut to their funding: the government has floated the idea of introducing a funding floor “to ensure local authorities whose funding position will decrease relative to others, based on their updated assessment of needs and resources, see their income protected by a specified amount”.
