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Fair funding consultation suggests funding formula could go full circle

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Commentary on the fair funding review technical consultation


The technical consultation on the fair funding review, published at long last yesterday alongside the provisional local government financial settlement, encapsulates a pressing dilemma.

The current system of annual funding allocations has 15 separate needs formulas and several tailored distributions for services supported by specific grants.

As the consultation points out, these formulas involve 120 indicators of need which reflect factors that have been identified as driving costs of service delivery.

Even if unpicking formulas is your thing, understanding exactly how individual allocations are determined is the next formidable barrier, with information currently aggregated to tier level, with no helpful explanation to guide one through the densely intertwined undergrowth.

While the majority of those who responded to the Department for Communities & Local Government’s call for evidence on needs and redistribution last year advocated a simpler approach, concern was expressed that this simplification should not come at the cost of accuracy.

It has been argued that the complexity of the formula is a reflection of the complexity of the various drivers of demand on the ground. The queston is, is it possible to retain a level of appropriate complexity while increasing transparency?

The consultation proposes to reconcile these opposing positions by first establishing a simple “foundation formula” to allocate a proprotion of available funding based on cost drivers – population, rurality, deprivation – common to all councils.

DCLG says this would enable “non-specialists to see in the clearest possible terms how the differences in common cost drivers between areas affected the level of funding authorities received”.

However, in order to ensure funding allocations to accurately reflect local cost drivers, DCLG is looking to identify service areas where a specific approach is required.

It comes as no surprise that these include children services and adult social care as they currently account for about half of service expenditure by councils.

The sheer level of demand, the fact that services are only provided by upper-tier councils and the difficulty in allocating funding on a population basis for targeted services requires a more complex approach.

Other service areas under consideration are highways and waste collection, other high cost service areas.

Following months of discussions between local government bodies and DCLG, there appears to be consensus that the general approach to funding outlined in the consultation forms the basis of a sensible approach.

But ahead of implementation in 2020-21, funding for the majority of council activity looks destined to end up in the realms of a complex formula which may leave some feeling that the whole process has simply gone full circle.

Jon Bunn, senior reporter

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