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GOVERNMENT GRANT DILEMMA

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Preparation for the setting of council budgets for 1998-99 is well under way and, while the financial effect of spe...
Preparation for the setting of council budgets for 1998-99 is well under way and, while the financial effect of spending plans is drawn together, treasurers will need to make assumptions about next year's government grant.

In opposition, the Labour Party was critical of the revenue support grant system. It was critical of both the method of support, where it showed a preference for a move away from general grants to more specific support, and of the basis on which funds were was distributed. Now, with the chance to make changes, the new government will find the task difficult. The sums distributed are substantial and even minor changes can create a ripple effect which may produce unwelcome results. There are as many different views about how local government should be grant aided as there are local authorities receiving grant.

Most government grants were given for specific purposes until 1958. They were not popular with the Treasury, however, because they were thought to encourage and reward higher spending. A return to specific grants may require a new form of assessing performance for grant purposes.

The development of performance indicators and more recently the use of non-financial performance factors for distributing grant in the further education sector could be extended with more research. The Labour Party complained that grant was distributed unfairly but it has been impossible to find a consensus for change. Even the much criticised area cost adjustment has remained virtually unchanged because all the alternatives examined produced unwanted side effects. Labour was particularly critical about the grant allowance for 'visitors' to an area, the so-called Westminster element, but detailed examination shows the factor benefits other inner-city areas and a large number of seaside towns as well.

If changes are not to cause a major outcry, more cash will be needed to ease the transition and, although this will be a stumbling block, there are some encouraging signs. The government has found new money for priority areas while insisting it is merely distributing existing resources. Supplementary credit approvals for housing and increased health spending from reserves are examples.

The most recent - and very welcome - addition to the health service budget is to be financed in part by cash to be collected from insurance companies for the cost of treating accident victims in accordance with legislation yet to be introduced.

All this suggests little immediate change to the method of support for local councils next year but plans will be announced for a detailed examination of the options available.

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