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Stephen Houghton: South East’s complaints of funding disadvantage are fiction

Stephen Houghton
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I wish to respond to a recent article in which the South East England Councils (SEEC) group claimed the authorities they represent are subject to unfair levels of underfunding and face “greater challenges” than other regions.

The group argued that, despite suffering proportionally fewer cuts, their members are profoundly disadvantaged due, primarily, to historically low levels of spending per resident.

This paints a fundamentally misleading picture.

Service costs are driven by the needs of residents. A simple per-head calculation therefore does little to explain council requirements. This is precisely why we have a needs formula.

In fact, the South East as a whole receives over £93m or more than £10 per head more than was deemed necessary under historic formula grant allocations, due to damping, a redistribution designed to smooth sharp funding changes. London is the only other area to have received more overall compared with other regions.

Regional impact damping

Regional impact damping

Source: DCLG 2013-14 

Statements regarding deprivation also need to be placed in a relative context. While the South East certainly contains pockets of deprivation, some of them members of the Special Interest Group of Municipal Authorities, the region as a whole is actually the least deprived in the country.

Not only does this overall affluence reduce the deprivation factors that drive demand, it also reduces the costs associated with service provision due to the higher proportion of residents who are able to self-fund vital services such as social care. This goes a long way towards explaining why the region is able to maintain among the lowest levels of spending per head in England.

Index of multiple deprivation

Index of multiple deprivation

Source: DCLG English Indices of Multiple Deprivation 2015

While there is no question that some areas in the South East, such as Portsmouth and Southampton, have high levels of deprivation and are disadvantaged by the current funding system, painting the problem with a broad regional brush risks confusing them with the likes of Wokingham and Buckinghamshire, which continue to rank among the most affluent in the country.

The SEEC rightly states that funding per head for the South East is lower than it is for London residents. There are certainly aspects of this that are unfair and it is important that this imbalance is addressed in the needs base of the new Fair Funding formula under 100% business rates retention.

However, when all regions are compared using raw service expenditure data, which encompasses key elements of council spending in areas such as social care and education and which Institute for Fiscal Studies data quoted by SEEC omits, it becomes clear that the South East spends only 4% below the national average per resident.

While the region arguably faces greater elderly social care challenges than London as a whole due to its larger elderly population, its proportion of elderly residents living in poverty and therefore the numbers of those requiring greater care funding, is much lower than other regions. Here, pension credits are used as a proxy for those likely to be unable to fund their own care.

Pension credit

Pension credit

Source: Nomis, May 2016

When equity within many south eastern homes is also considered, there is a strong argument that the South East is likely to have among the highest proportion of social care self-funders in the country, significantly reducing their relative cost pressures.

Moreover, as the chair of SEEC points out, the South East is, next to London, one of the best performing regional economies in England. In light of the pending transition to 100% business rates retention and the erosion of the revenue support grant all councils now face, the region therefore remains in a comparatively strong position to take advantage of growth retention.

Though our current funding system is in vital need of a fair recalibration based on the demand and pressures councils face, diverting yet more funding away from high-need areas with low rates bases to a relatively affluent part of the country would simply exacerbate a vast and growing national divide.

While all councils are struggling to manage the cumulative pressure of ever deeper cuts and all comparisons of hardship are therefore relative, the idea that the South East as a whole is disadvantaged by the current system is truly a fiction.

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

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