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Richer areas 'to benefit more' from settlement

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Richer areas will be the beneficiaries of much of the extra funding found for the sector in yesterday’s local government settlement, it has been claimed.

Among the measures set out by housing and communities secretary James Brokenshire was the government covering the cost of negative revenue support grant, which would have otherwise led predominantly wealthy areas to have to pay into central coffers, and 12 of the 15 new business rates retention pilots being located at least partially in two-tier areas.

An Institute for Fiscal Studies analysis shows extra money and other recent announcements have reduced the level of decline in funding.

However, the combined funding from government grants, business rates and council tax will be 1.4% lower in real terms in 2019-20 than in 2015-16, the institute calculates. This fall of £0.6bn amounts to 4.2% lower per person when population growth is taken into account.

The institute says yesterday’s settlement, combined with other extra money announced in recent years, reduces the fall in core spending power from 7.7%, as planned in the 2016-17 settlement, to 4%.

Since 2015-16, the least deprived fifth of councils have seen a 0.3% real-terms funding increase, while the most deprived have seen a funding cut of 2.8%.

“Thus it continues to be the case that cuts to council funding have fallen heavier on poorer areas than richer areas of England,” say IFS associate director David Phillips and research economists Polly Simpson and Neil Amin Smith.

They say funding has benefitted “richer, less grant-dependent councils more” than those reliant on central funding partially because the former grouping can raise more from the 3% council tax hike which is allowed both this and next year.

In an LGC article, Sir Stephen Houghton (Lab), chair of the Special Interest Group of Municipal Authorities, said Mr Brokenshire’s decision to eliminate negative revenue support grant “gifted £153m to some of the richest authorities in the country, taking no account of local needs”.

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