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Stephen Houghton: 'Fair' funding plans would hurt most deprived

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The Scottish philosopher David Hume probably wouldn’t have looked favourably on the latest “fair” funding review consultation, and unfortunately neither do we.

According to Mr Hume, one of the great empiricists of the British Enlightenment: “A wise man proportions his belief to the evidence.”

If the total funding is inadequate we are all in trouble. But since this appears all but inevitable, fair redistribution may be the only way statutory services can be sustained for the most vulnerable.

The government’s latest proposals, laid out in the review of local authorities’ relative needs and resources, would systematically disadvantage residents in deprived urban areas for years to come.

In particular, the omission of deprivation from a foundation formula, which would allocate around a third of council funding, concerns us, not least because it contradicts even the little evidence the government provides.

This would impact services such as homelessness support, particularly in demand in urban areas and more vulnerable communities.

The omission flies in the face not only of the available evidence, but also common sense. The government’s own calculations suggest deprivation explains at least 4% of the variation in spending on foundation services. Independent academics from Liverpool University have recently argued the real impact could be as much as 40%.

Our analysis suggests the government’s use of a simple average – which bundles together 11 services and hundreds of councils – hides significant variation in the impact deprivation has on individual authorities, including in the most vulnerable communities. And independent experts like the Institute for Fiscal Studies concur.

We say deprivation must be in the foundation formula, London Councils says it must be in, and the Local Government Association says it must be in. Most importantly, the evidence says it must be in. The government must recognise this compelling consensus and that simplicity must not be pursued at the expense of accuracy and fairness.

It’s not just the omission of deprivation that rings alarm bells. This consultation proposes a highways maintenance formula which would take no account of vehicle weight, weather conditions or road type.

This ignores the factors that most influence road damage like potholes. It would disproportionately disadvantage urban authorities, particularly those in more inclement northern and coastal areas.

The inclusion of rurality measures in an area cost adjustment, which the government plans to apply to the foundation as well as almost all service specific formulae, is also proposed without enough supporting evidence.

Independent research the department commissioned themselves just a few years ago, from a research group they describe as “experts in their field” has been apparently ignored. The research found that only 15% of spending increased with rural sparsity whilst 31% actually increased with density, with the remainder unaffected either way.

One of the rightly-stated guiding principles of this review is robustness. In this, the government recognises, at least in principle, that “the new funding formulas should take into account the best possible objective analysis”.

This principle is fundamental to arriving at a formula that all of local government can recognise as fair. In practice, however, the way this consultation has been conducted falls seems to short of this standard.

Ensuring we see a more enlightened, evidence-based review in practice is in everyone’s interests so that we all have the opportunity to scrutinise these important proposals.

Stephen Houghton (Lab), chair, Sigoma and leader, Barnsley MBC

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