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Anatomy of a funding spat

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LGC’s essential daily briefing

The government will implement full business rates retention by 2021 and as a result is conducting its fair funding review of local authorities’ needs.

Councils now have the opportunity to bid for a bigger share of funding, albeit from an ever-shrinking pot. As in a game of musical chairs when a critical number of seats have been taken away, the competition can become quite frantic.

So when the Institute for Fiscal Studies published data in late December showing spending by councils in two-tier areas had fallen significantly less since the start of the decade than in unitary areas, a scrap over who currently gets the smallest (relative) slice of cake and deserves more was inevitable.

The IFS report said that across England, council spending fell by 23% in real terms between 2009-10 and 2016-17, but that net spending by metropolitan authorities and London boroughs fell by around 30% while in shires the reduction was just 15%. The data also showed regional disparity, with north-east and north-west metropolitan areas faring worse than south-east counties.

So far, so shire-friendly. But as soon as Christmas was out of the way, Tonbridge & Malling BC leader and South East England Councils chair Nicolas Heselop (Con) hit back in an LGC column claiming that really, counties in the south-east had a worse time of it.

Cllr Heslop conceded that funding had fallen to a lesser extent in two-tier areas in the south-east, but added the latter were already spending far less per resident at the start of the decade.

“In 2009-10 councils in the south east spent an average of £774 per person, the lowest level in the country and just over half of London councils’ £1,421 average spend per head,” Cllr Heslop wrote. “This is despite many parts of the south east also being high-cost areas, with high numbers of residents in income deprivation.”

So, was it unfair to say that southern counties suffered less, when they had less to lose and arguably more work to do in the first place?

Stephen Houghton (Lab), leader of Barnsley MBC and chair of the Special Interest Group of Metropolitan Authorities, was having none of it.

Last week Sir Stephen responded to Cllr Heslop’s column with one of his own. He said the south-east as a region already received “£93m… more than was deemed necessary under historic formula grant allocations, due to damping, a redistribution designed to smooth sharp funding changes”.

Sir Stephen added that although there were pockets of deprivation in the south east, the region overall was “actually the least deprived in the country” and was home to a high proportion of affluent people able to fund their own care, which was why the region was able to maintain low-per head spending.

He concluded that although all councils were struggling with ever-deeper cuts, “the idea that the south-east as a whole is disadvantaged by the current system is truly a fiction”. Ouch.

The government is due to publish a final consultation on the mechanism of its chosen distribution method in 2018.

Without an increase in local government funding, such as through a drastic change to the way that social care is funded as demanded today by the LGA, it seems unlikely any part of the sector will be happy at the end of this process.

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Readers' comments (1)

  • I'm not sure that 2009/10 is a good base year to measure expenditure from. My recollection is that the Gordon Brown administration went on a bit of a one off spending spree which mainly benefited the Midland and Northern metropolitan areas. So it could be that the clawing back of that money might explain the figures a bit.

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