The local government finance system is broken. Few, if any, who operate within local government believes it shares national resources fairly.
Our finance and research team have analysed the current distribution of resources and come up with a much fairer way of sharing resources. Along the way they have found some very interesting results.
The key elements of income for councils are council tax, business rates and revenue support grant. These make up the lion’s share of ‘spending power’, which is the way government describes local government income. In our analysis we have created virtual unitaries by adding districts, counties and fire authorities together in two-tier areas, so as to compare different classes of authority.
The councils with the highest spending power in England are London authorities; they account for 23 of the 25 highest-funded authorities. Those with the lowest spending power include counties such as Leicestershire and Staffordshire and unitaries such as Trafford, Warrington, Bury and Leeds. The differences in spending power are huge. If Leicestershire had the same spending power per head as Camden it would be £400m better off.
We ran tests on 100 indicators to see if there was a statistical relationship between spending power and drivers of need such as income deprivation. We found that in only 13 cases there was a correlation.
The next stage of our work was to develop a model that shared resources fairly. We identified factors that drive demand for local services, so for adult social care the key cost drivers are numbers of older people and disabled adults, and income deprivation. We took a similar approach to other services.
We then modelled a system where spending power was shared proportionately taking account of these cost drivers and other factors such as density and sparsity.
The impact was to redistribute spending power and in the process narrow the differential between the highest and lowest funded councils. London no longer dominated and councils such as Hartlepool and Lincolnshire ended up among those with the highest spending power. Leicestershire, although remaining one of the lowest funded, did receive increased spending power. Most importantly, when we tested the model, 49 of the 100 need indicators showed a statistical relationship with the revised allocation of spending power.
I accept all authorities can justifiably say they are underfunded but at the same time some authorities are more underfunded than others.
We hope the government seizes the opportunity to make the system fairer. Failure to address these concerns will result either in service and financial failure, or residents simply receiving a much reduced level of service than elsewhere in the country. In effect that would be a government-imposed post code lottery, which would clearly not be fair.
Byron Rhodes (Con), deputy leader, Leicestershire CC