A cross-party deal has seen the Local Government Association (LGA) back retention of deprivation as a factor in the foundation formula.
But it has left unresolved how deprivation should be reflected in allocations to councils amid tensions between mainly Labour urban authorities and Conservative rural ones.
The deal was reached by the LGA’s leadership board and formally endorsed today by its executive.
Resources board chair Richard Watts (Lab) told LGC: “We did decide that deprivation should be a factor in the founding formula but have not yet made a decision on the degree to which it should be a factor.”
LGA chair Lord Porter (Con) told the executive: “We are unanimous that deprivation should be in it.”
A paper adopted by the board said: “Members agreed that the LGA response [to the government] should state that deprivation should remain as a cost driver in the foundation formula, and it would be for the government to work out how this should be weighted.
“A significant part of the LGA membership would agree with this, and the response should be clear and strong on this issue, but there should be robust evidence to support the weighting.”
The government proposed deprivation should not to be included as a cost driver in the foundation formula.
It instead sought a single per capita foundation formula for upper and lower authorities, for which population would be the only cost driver, alongside seven service-specific formulae.
Deprivation would be taken account of in the adult social care, children’s services, public health and fire & rescue formulae.
This angered urban authorities but was welcomed by many rural ones.
County Councils Network chair Paul Carter (Con), leader of Kent CC, earlier this week denied claims that excluding deprivation from the foundation formula would unfairly penalise urban councils.
He said: “It is wrong to claim that deprivation will be ignored. It is most likely that deprivation will be a significant factor for people-based services, such as adult social care, children’s services and public health – which account for around 70% of all local government spending.”
Cllr Carter was present at the subsequent LGA executive meeting but did not speak on the deprivation issue.
Writing for LGC, Sir Stephen Houghton (Lab), chair of the Special Interest Group of Municipal Authorities, said: ”The counties talk about the old formula being unfit for purpose. But, since the whole sector agrees that the purpose of a needs formula is to allocate funding according to relative need (the clue is in the name), we would argue that proposals set out in the new formula are even less fit for purpose.
“When the counties make the case for a ‘flatter formula’, it is therefore difficult from our perspective not to see this as an argument that needs should matter less.”