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Dick Sorabji: Funding reform must move beyond formulae

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Housing and youth crime are top priorities for London’s incoming 32 leaders and mayors. And over the next 18 months decisions on funding will shape London’s ability to tackle these priorities in the years beyond 2020.

The fair funding review has begun, while the spending review 2019 awaits a gap in the Brexit timetable. Proposals on business rates 75% retention and adult care funding add to the uncertainty.

Local government is nearing the edge of financial viability. To gain a reprieve we cannot simply describe the threat. The challenge is to explain why Whitehall delivery depends on a new deal for financing local government.

The fair funding review discussions will run for 18 months. The review’s technical detail must be underpinned by simple principles. Obviously grants per head should vary between authorities – the alternative is the mindset of the poll tax.

Deprivation is central to any debate, but it varies across towns and cities. Cities generate wealth and suffer poverty. London has more children in poverty than Scotland and Wales combined, while Manchester and Birmingham have similar spikes in deprivation.

This is to say that each community has unique pressures. London has 45% of the UK’s asylum-seeking children, and two-thirds of those in temporary accommodation. Other parts of England have different needs.

Councils share pressures like the adult care funding gap, which is more than £300m in London. Children’s social care overspending is rising, and is now £3.5m per borough in London.

Yet if we only create the perfect fair formula, we do no more than agree the order in which councils fall into crisis.

National grants have been cut by 63% since 2010. Council spending power is meanwhile down over 20% in the counties and almost 35% in met authorities since 2010. Overspending topped £900m in 2016-17 as sustainability ebbs away.

The spending review 2019 is where the argument on adequate funding will occur. Councils start at the back of the queue for sympathy. If we can’t be most loved, then we must become most respected.

That may be possible by showing how local government provides the best return on investment and the best springboard for innovation. Behind the scenes it is councils that work across public services, making them all more efficient. It is councils that engage with voters on the tough issues like tax and win consent to act.

The evidence has been revealed through austerity. Care services have been the key to addressing the winter beds crisis. Youth services are a defence against the rise in youth crime. Building plans fail when planners’ budgets have been cut by 53% since 2010. Local politicians show that they can handle the debate on higher taxes with their electorates.

If we can make this case to government, then we move beyond academic debates over formulae and help government to design financial reforms that will last.

Dick Sorabji, corporate director for public policy and affairs, London Councils

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