Research hints at scale of change posed by Fair Funding Review

Hundreds of millions of pounds of adult social care funding could be redirected from councils in the North and Midlands, according to a Local Government Association (LGA) analysis.

The LGA has examined the impact of the proposed relative needs formulas for allocating adult social care funding to help member authorities “gauge the likely impact of the Fair Funding Review, which is being targeted for introduction in 2021/22.

3rd LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

Its figures showed that in the case of funding targeted at so-called “younger adults” – those aged between 18 and 64 – the new system could deliver an 11.58% decrease in funding for the North East, a 9.95% drop for Yorkshire and Humber, and a 9.59% decrease in the North West.

At the same time the West Midlands would see a 7.70% reduction in its share of funding for younger adults and the East Midlands would have a 5.70% reduction.

Conversely, London would see its share of the “total England need” increase by 12.87% and the south east share would go up by 12.44%.

In terms of the relative needs formula for younger adults, Knowsley Metropolitan Borough Council on Merseyside faces the biggest proportional reduction: 23.16%; Wokingham Borough Council in Berkshire is looking at the biggest proportional increase: 47.79%.

While the figures are based on population, they would nevertheless represent real and pressing impacts on councils facing reductions of any magnitude.

The LGA said councils’ “highly approximated” budget for adult social care was £16bn in 2018/19, of which £7bn was earmarked for the 18-64 cohort and £6bn for the over-65s with a “significant amount” not directly allocated to either group.

The government has yet to make a decision on how much funding would be distributable through the formulas, but the LGA said the “notional national total amount” of funding for either care category could be used to establish a cash change from one formula to the other for individual councils

The LGA said its analysis did not represent a policy, policy proposal or preference on its behalf.

But it said the impact the data indicated would need to be understood and planned for at local level and compensated for by ministers at national level.

“We are clear that the results of the review must be introduced alongside additional funding,” it said.

“No outcome of the review will be sustainable if overall resources are insufficient to maintain services as councils have seen significant reductions in funding and are facing significant cost pressures in the future.

“The LGA is calling for no local authority to see its funding reduce as a result of the review and a transition mechanism, backed by additional funding, would help deliver this aim.”

It said the government needed to publish official illustrations of the potential changes in funding for each individual council as soon as possible.

“There has to be a clear timetable on when various consultations will be published, decisions made and the review concluded ahead of April 2021,” it said.

The LGA that population was the biggest driver for the relative needs formulas and that it had used 2017 mid-year population estimates for its calculations, while the government’s proposal was to use population projections that would mean the end result would “look different”.

While the North East, North West, and West Midlands all marked decreases in their share of relative need for adult social care for the elderly, the shifts were less pronounced than for younger adults.

The East Midlands and the South East were the areas of biggest growth, at 6.15% and 4.84% respectively.

London marked the largest drop in its “share of total need” for the elderly, with a decrease of 10.83%.

Earlier this month a senior Ministry of Housing, Communities and Local Government official indicated ministers were minded to set aside councils’ commercial income from calculations on how much central government funding they required.

Stuart Hoggan, deputy director for local government finance at MHCLG and is working on the Fair Funding Review, said including commercial income could de-incentivise councils from exploring new revenue streams if restraints emerged on how such income could be spent.

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