Population proposed by ministry as sole factor in foundation formula
0The Ministry of Housing, Communities and Local Government launched a consultation yesterday, which will close on 21 February next year, as the next step in its Fair Funding Review, which will establish new baseline funding allocations.
The review aims to revise the methodology introduced over ten years ago, and which has not been updated since 2013-14.
In addition to bringing it up to date, it aims to simplify the system, with a smaller number of indicators.
The new “technical consultation on the assessment of local authorities’ relative needs, relative resources and transitional arrangements” sits alongside another launched yesterday on business rates retention reform, which again seeks responses by 21 February 2019.
The government aims to publish indicative allocations ahead of the 2020-21 provisional local government settlement.
The review of local authorities’ needs and resources will set new baseline allocations, assess relative needs to determine the redistribution of business rates, take a look at how council tax income should be taken into account for the redistribution of business rates, and consider other potential sources of income for councils.
It will also look at transitional arrangements for the introduction of the changes.
The ministry describes this more simply in a formula: “Final funding position = (relative needs share – relative resources adjustment) + or – possible transitional arrangements + actual resources income.”
The proposals are the ministry’s response to the earlier consultation it launched in December last year.
It then put forward using a foundation formula, alongside several service-specific formulas.
Its new document says that “… population is by far the most important cost driver for the foundation formula.
“On this basis, the formula includes population size (based on Office for National Statistics population projections) as the only cost driver, which means these services will be funded on a simple ‘per capita’ basis, with an Area Cost Adjustment applied.”
The original consultation asked whether in addition to population, deprivation and “rurality” should feature as cost drivers in the foundation formula, but the ministry concluded that population alone explained by the greater part of all variation in past expenditure (88.1% for upper tier authorities and 84.0% for lower).
However, deprivation will feed into four of the seven service-specific formulas which will be used in determining how much councils receive.
These are for adult social care, children and young people’s services, public health, highways maintenance, fire and rescue, legacy capital finance, and flood defence and coastal protection.
Rurality will be covered in a new area cost adjustment methodology”, which will be “… applied to the foundation formula, so that together they will determine needs allocations.”
There will be further consultations on the formulas for adult social care and public health, and the ministry has commissioned LG Futures to head up research in to the formula for children and young people’s services.
