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Stephen Houghton: Negative RSG plans are a gift to rich authorities

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The elimination of negative revenue support grant (RSG), should it be brought forward next year, will undermine the confidence of deprived urban areas in the Ministry of Housing, Communities and Local Government’s ability to deliver a genuinely ‘fair’ funding review.

With it, the secretary of state James Brokenshire has gifted £153m to some of the richest authorities in the country, taking no account of local needs.

He has also chosen to divert an extra £16m to rural areas, despite an independent study by LG Futures, commissioned by the ministry and referenced in a consultation on the fair funding review, that showed rurality does not increase overall funding need.

While an additional £180m in business rates surplus being distributed based on need sounds promising, and may soften the other blows, the detail may not prove this.

Regardless of its impact, these announcements are set against a concerning pattern of behaviour whereby the ministry has consistently diverted funding away from the poorest areas.

Deprived areas outside London will have lost out on almost £1bn since 2010 when austerity began, through negative RSG compensation, the rural grant and the transition grant.

Of the authorities that benefit from the elimination of negative RSG, 87% are shire districts with no social care responsibilities and 100% are more affluent than the English average – according to the ministry’s own measure.

Councils across the country are cutting to a bare minimum of statutory services to keep up with growing demand for social care. The most deprived areas where demand is greatest have been forced to make cuts far deeper than the most affluent.

In this context, the ministry’s priorities for this settlement are misplaced, just as they were in previous years when even the National Audit Office was compelled to investigate their tenuous justification for the transition grant, which benefited many of the same authorities as this latest decision.

Through the public accounts committee, we recently learned that the ministry doesn’t monitor whether council budgets are sufficient to meet residents’ needs. It focuses instead on whether an authority can balance their budgets.

Any council can balance a budget if they ignore the consequences for residents. Local government has shown repeatedly that it is better than that. But for many what may have started as a drive for efficiency is now a heart-breaking exercise in damage limitation.

It would have cost the department £2bn to eliminate negative RSG fairly based on a relative needs allocation to all authorities. But this option was deemed “unaffordable”. This is despite repeated warnings from the LGA that the sector faces a £5.8bn funding gap by 2020 and despite the context of a recent £20bn funding boost for the NHS.

Instead the ministry has chosen to do so unfairly, compensating only those authorities whose relative needs are deemed so low that the department’s own funding methodology would have seen their share of redistributive funding reduced to less than zero.

Mr Brokenshire still has a chance in the final settlement to restore the confidence of deprived areas and the wider sector and to show that the prime minister’s mantra of “a country that works for everyone” is more than empty words. But that opportunity is vanishing fast.

I want to believe that the damage being inflicted on local government is a result of short-sighted monitoring and not of a department wilfully closing its eyes to the consequences of the cuts. A lack of insight can be more easily fixed and forgiven than an absence of conscience.

But whatever the case may be, the centre must open its eyes now, while there is still time to change course and before it loses our good faith entirely.

We are calling for the minister to either eliminate negative RSG fairly through a £2bn funding injection that benefits all local authorities based on need, or to use the £153m instead to support social care services.

Sir Stephen Houghton (Lab), chair, Sigoma and leader, Barnsley MBC

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