Local Government Finance

(asked on 21st February 2019) - View Source

Question to the Department for Levelling Up, Housing & Communities:

To ask the Secretary of State for Housing, Communities and Local Government, pursuant to the oral contribution of 5 February 2019 of the Under-Secretary of State for Housing, Communities and Local Government, Official Report column 289, how that 4 per cent figure relating to deprivation was calculated.


Answered by
Rishi Sunak Portrait
Rishi Sunak
Prime Minister, First Lord of the Treasury, Minister for the Civil Service, and Minister for the Union
This question was answered on 26th February 2019

The Government is undertaking a review of the relative needs and resources of local authorities in England, with a view to setting fresh baseline funding levels in 2020-21. We are working closely with local government representatives and others to consider the drivers of local authorities’ costs, the resources available locally to fund services, and how we should account for these in a way that draws a more transparent and understandable link between local circumstances and resource allocations.

In December 2018 the Government published a consultation paper, which set out a proposed approach to assessing the relative needs of local authorities. Our analysis has shown that for many universal services, the number of people in each local authority area is the most important predictor of the costs that councils face in delivering those services. The consultation therefore proposes the introduction of a simple population-based Foundation Formula to account for many of the universal services that local authorities deliver, alongside several specific funding formulas for some of the largest and most complex service areas.

To understand whether including additional ‘cost drivers’, including deprivation, significantly improves the precision of the Foundation Formula, a comparison was made between the amount of variation in past expenditure that was explained by different combinations of cost drivers, to the total amount of variation in expenditure. The basis on which this comparison was made is set out in pages 19 to 21 of the consultation paper (link below). Whilst, in aggregate terms, deprivation was not shown to be a major cost driver for the services included in the Foundation Formula, to ensure that deprivation is appropriately accounted for in the relative needs assessment, deprivation, or a suitable proxy for deprivation, is taken into account in four of the service-specific formulas that were proposed.

https://www.gov.uk/government/consultations/review-of-local-authorities-relative-needs-and-resources.

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