News analysis Does Raynsford have the right funding formula

18 Jul 02
Nick Raynsford has revealed a talent for nifty conjuring tricks in his proposals for reforming the notoriously complex Standard Spending Assessment, the method by which authorities receive their grant from central government.

19 July 2002

The consultation document, Formula grant distribution, published by the local government minister on July 8, set out between four and six methods of calculating each of the block grants distributed under the SSA. It seems to have pulled off the neat trick of offering something for almost everyone.

The potential for its publication to be accompanied by howls of protest was great. Different types of council stand to gain, depending on the options selected, and it stands to reason that if one authority wins another must lose.


When Raynsford unveiled the proposals last week he acknowledged this fact.


`Pragmatic decisions will be needed to produce a workable system, and the complexity and variety of the pressures that are put upon the system from all sides mean that it will not be possible for all authorities to get what they want from this process,' he said.


`The government is seeking a fair distribution of resources which takes account of today's pressures on local government and the particular needs of areas of deprivation.'


But initial reactions suggest that his proposals have reconciled these competing impulses rather successfully: most major local authority groupings have identified areas of service provision where they are likely to benefit.


The biggest winners are the metropolitan authorities in urban areas in northern England. The increased emphasis on deprivation will see these areas receive more money across a range of service blocks to tackle the problems caused by high rates of poverty.


But the London boroughs, or at least those containing pockets of social deprivation and areas with high ethnic minority populations, also stand to benefit. Some of the leafier outer-London boroughs will find themselves worse off, but the majority are likely to see a welcome increase in their budgets.


Initial calculations by the Association of London Government indicate that a worst-case scenario would see the 33 London authorities lose £600m, while the best outcome would see them gain £400m.


Its members are pleased with the options outlined for the Area Cost Adjustment and, in education, the recognition of ethnicity and its attendant language issues as a resource consideration.


ALG chair Sir Robin Wales's warm comments suggest that London expects to do fairly well under the reformed system.


`The ALG is pleased the government has listened to its calls for deprivation to be taken into account in drawing up the formulas. The capital contains three of the five most deprived boroughs and two-thirds of the most deprived local authority housing estates in England.'


Even the counties, the group most likely to lose out under the reformed system, are not panicking yet. The County Councils Network has estimated that the shires stand to gain, at best, £100m or lose up to £800m.


But rather than railing against the reforms, the CCN is drawing comfort from Raynsford's staunch insistence that there is no hidden agenda to give more money to Labour authorities in the north.


`We are not going to let the government off the hook on this one,' director John Sellgren said.


The government is undoubtedly aware that clobbering the southern shires would have repercussions for Labour MPs defending marginals in those areas: taking money from the Southeast to benefit northern Labour heartlands would do little to keep middle England onside.


The 12-week consultation period is an opportunity for local authority groupings to argue their cases. The final decision on which options are implemented lies with the government.


But, on the evidence so far, it appears likely that ministers will try to maintain the mood among councils of quiet co-operation, and shy away from a decisive redistribution of central government funding.



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