Council funding system is ‘comprehensively broken’

COUNTY LEADER SAYS ACTION NEEDED IN SHORT TERM AND THROUGH FUNDAMENTAL REVIEW

THE funding system for local authorities is “comprehensively broken” and should change, the leader of Leicestershire County Council says.

In an article on the Conservative Home website, Nick Rushton, pictured, outlined the faults in the system of local government funding, which he said has resulted in a “risk of collapse for some authorities”.

County Hall recently revealed it will likely need to borrow about £166 million to meet its expenses between now and 2025.

Coun Rushton said: “Local government funding is comprehensively broken. Allocations today are still linked back to historic spending levels – rewarding those who spent the most on services decades ago.

“This means taxpayer funding is increasingly badly matched to demand and need, exacerbating existing imbalances between different places.”

The government promised a review of council funding, but this was put on hold due to the pandemic. When it is complete, the Fair Funding review will establish new baselines for each authority.

Coun Rushton said the data used by the government to determine the level of funding received by each council has not been updated since 2013 and that much of it is older than that.

Council tax bands are still based on property values from 1991, meaning many do not reflect the current value of a house.

He added that the use of targeted grants “weakens resilience in the system”.

“According to the Local Government Association, of the approximately 250 grants issued to councils each year between 2016 and 2019, over one in three were discontinued from one year to the next,” Coun Rushton said.

“This is no way for councils to plan for the long-term. These smaller grants are reactive, responding to crises that have emerged and become entrenched.

“These problems are so deeprooted a comprehensive rethink is needed, which the Government has already committed to through the Fair Funding review.

“Understandably, this review has slipped due to the disruption caused by coronavirus. But as we emerge from the worst of the pandemic, it is imperative the government grasps the nettle once again.

“For now, the government could introduce an interim measure to level up local authority funding to a more sustainable level.

“If a fixed sum of additional funding was made available, this could be directed at pulling up those authorities with low core spending power per head closer to the national average.

“Setting this floor at 90 per cent of the average core spending power of local authorities, we have estimated the costs of this to be £300 million a year.

“Around 30 of the poorest local authorities, mainly in the Midlands and the North of England, would benefit from the change.

“Although this proposal for a funding floor would create more resilience in local government finances, again, this stop-gap measure should not replace the wholesale reform of the comprehensive Fair Funding review in due course.”

Taxpayer funding is increasingly badly matched to demand and need

Coun Nick Rushton