Conservative-led councils will be the main beneficiaries of the government’s decision to stump up the £152.5m cost to councils experiencing negative revenue support grant (RSG), LGC analysis of government figures shows.
LGC reported last month how the Ministry of Housing, Communities & Local Government said it would forgo some of its share of business rates in order to cover the costs of councils who will receive no RSG in 2019-20 and were also set to have their business rates tariffs adjusted resulting in a double-whammy loss of funding.
One critic has called the ministry’s move a “scandalous abuse of public money” due to the way it mostly benefits Conservative-led councils – combined they will receive about £129.8m, or 85% of the total.
|Negative RSG compensation beneficiaries by political party|
|Political party||Total due|
|No overall control||£7m|
Out of the 158 local authorities which will be compensated just 21 are top-tier councils.
The ministry’s figures show Surrey CC is to receive the most compensation (£17.3m) followed by Buckinghamshire CC (£10.9m) and Dorset CC (£10.1m).
|The 10 councils which will receive most negative RSG compensation 2019-20|
|Council||Amount due||Political control||Council type|
|Richmond upon Thames||£7.5m||Liberal Democrat||London borough|
Looking at different types of authority, county councils will receive the most funding (£63.1m) followed by districts (£57.3m). Combined these two types of authority will receive 79% of the £153m. Just three London boroughs and four unitary councils qualify for compensation, all of which are Conservative-led.
|Negative RSG compensation: amount different council types will receive 2019-20|
|Council type||Total received|
Concerns about the way negative RSG is being dealt with comes two years after the government’s transition grant controversially distributed £300m funding mostly among Conservative-led councils. Surrey was also the biggest winner under that scheme which sought to smooth the path for councils facing the steepest cuts to revenue support grant, and address concerns about delivering services in rural areas.
Surrey leader David Hodge (Con) said it was “mainly Conservative councils who were going to lose out on this deduction” and added: “In no way is Surrey CC ‘the biggest winner’ from this announcement. In truth, we were the biggest loser when the government revealed it was planning to end our grant but make Surrey taxpayers hand over £17.3m to Whitehall. All they have done is cancel this out, and rightly so.”
Cllr Hodge said Surrey already contributes “significant” levels of funding to the government and he was “delighted” that had been recognised as it would have been “unjust” to ask for further contributions.
“If your wallet was stolen with £100 inside and the police found it, you aren’t suddenly £100 richer,” he said.
Nottingham City Council will see RSG cut by £10m to £25m next year but does not qualify to receive any compensation funding. Deputy leader Graham Chapman (Lab) said: “[The ministry’s proposal for dealing with negative RSG] is a scandalous abuse of public money under the guise of objectivity.”
In its technical consultation the ministry said it had “explored a number of possible options for addressing” negative RSG and found using some of the government’s share of business rates income to compensate affected councils “represents the most direct and simple solution to the problem.” Altering the funding allocation methodology was “discounted” for a variety of reasons, while providing extra core funding was considered unaffordable as “the quantum of funding needed to completely eliminate negative RSG” totalled more than £2bn.
Cllr Chapman said it was “frankly outrageous that the government is once again choosing to bail out councils in better-off areas”, largely in the south, “when poorer councils in the North and Midlands, in areas with higher need, are losing out”.
Sir Stephen Houghton (Lab), chair of the Special Interest Group of Municipal Authorities, criticised the government for dealing with negative RSG “in isolation” and warned it risked “undermining confidence not only in the 2019-20 settlement but the whole process of the fair funding review”.
In an article for LGC on the topic of negative RSG, Sir Stephen said: “If government are now minded to put additional funding into local government that should be a cause for celebration but when this is done for the benefit of the wealthy few, rather than being allocated where funding is most needed, it brings the whole system into disrepute.”
He also said Sigoma “will be objecting strongly” to the ministry’s proposal to compensate councils in this way.
A spokesman for the ministry said: “We recognise there are a range of views on the issue and will consider closely all responses to our consultation. However, we believe this is the fairest and most cost effective option, directly solving the issue at hand.”
This story was updated at 14.23 on 7 August to include a comment from the Ministry of Housing, Communities & Local Government. The story was updated again at 16.35 on 13 August to include comments from Surrey CC leader David Hodge.