Asked about the impact of the new distribution mechanism on different types of authority following the fair funding review this morning, local government minister Rishi Sunak said there had been “broad agreement” counties were the areas under greatest financial pressure.
“I would say upper-tier authorities clearly are facing pressure because they are the ones dealing with statutory social care services,” he told the housing, communities and local government committee.
“County areas, relative to a unitary or a met, might have a smaller base to amortise that over – you can see why that would be a challenge.
“Counties would also say they face a historic underfunding penalty, which is why they are suffering more than anyone else.”
He said the new arrangements would allow account to be taken of actual need in order to alleviate pressure on these authorities.
“It will be a fresh look, evidence based, from a blank sheet of paper, so it ought to be the most accurate and contemporary picture we can paint of what is driving need,” he said.
“If it’s as good as it should be, the distribution of resource will accurately reflect need where it occurs on the ground.”
Asked whether deprivation would be reinstated as a criterion within the foundation formula, he said that a decision was still to be taken on the detail of the mechanism.
“We will come back with a final view on that… but people are very happy to have a system that is simpler and has fewer variables driving it,” he said.
“Deprivation was found not to be a particularly significant variable, and it was a way to reduce complexity in the system.”
He stressed that deprivation would be included in service-specific elements of the distribution mechanism – for example, within the formulae for adults’ and children’s services, which accounted for two-thirds of council spending covered by the review.
On business rates, Sunak said there was strong backing within councils for the move towards greater local retention of revenues, but that the complexity of the new system had to be addressed.
“If you talk to local government, they like the idea that they get to keep more of the locally generated growth,” he said.
In particular, councils welcomed the opportunity to think more entrepreneurially and, through pooling arrangements, to work more closely with other authorities.
However, the complexity of the proposed changes was an issue, he said, especially the volatility of appeals, which was cumbersome for councils to deal with.
“It is very complicated and… we are desperately trying to simplify it,” he said.
A spokesman for the County Councils Network welcomed the minister’s acknowledgement of the pressure on upper-tier authorities.
“The minister was also right to highlight that the consensus view emerging from both the research and evidence to the committee from a wide-range of stakeholders is that county authorities face the most severe financial challenge going forward,” he said.
“It is now imperative that other departments, including the Treasury, engage seriously with research as part of the Spending Review process.”
