Analysis: why the “regulation for stability” did not do much to level up

Fireworks will surely come next year if ministers seriously consider “leveling” funding between richer and poorer areas.

For a government allegedly engaged in a dramatic redistribution of money from the richer areas to the poorest “left behind,” the December local government regulation signaled only a modest declaration of intent.

“The proposals in this document relate to 2022-2023 and are focused on stability,” the consultation document said. For those municipalities which are – in relative terms – treated favorably in the existing system, stability is of course welcome. However, unless the pie increases significantly, redistribution from the richer areas to the poorer areas is necessary to level up – and, certainly for potential losers, the prospect of losing an unknown portion of your slice. looks a lot like instability.

So, in his first financial settlement of the local government, Michael Gove walked a fine line between ensuring stability and offering additional support to areas left behind – the kind of places that lost colonization after colonization during the last decade. Remember all those years when formulas conspired to forever make Wokingham BC in Berkshire the council least affected by austerity?

Mr Gove’s work was aided by Chancellor Rishi Sunak’s spending review in October, which awarded the local government £ 4.8bn in additional grants over the next three years. So in December, Mr. Gove felt in a position to offer boards a 4.1% real purchasing power increase for 2022-2023, which at first glance doesn’t seem so bad.

The problem is, we already knew that the funding available for councils as a whole is insufficient to withstand the increased demand for the services they face, especially as areas and services seek to recover from the ravages. of Covid. And of course, that means further increases in the housing tax – when the population is already reeling from a cost of living crisis.

Mr Gove’s unexpected trump card for the financial settlement was a one-time ‘service grant’ worth £ 822million. This will be distributed according to the existing formula to assess the relative needs of the municipalities, and will last only one year, thus allowing the sector to evolve. Meanwhile, the income support subsidy rises with inflation, and some details have emerged of the extra money previously pledged for social care.

The effect of the extra money coming from subsidies, rather than the possibility of raising the council tax as the main means of increasing purchasing power – which was previously in vogue – means that the beneficiaries are not the places like Wokingham that benefit the most from the ability to raise tax council.

According to analysis by Institute for Fiscal Studies research economist Kate Ogden and associate director David Phillips, the tenth of the poorest municipalities will see their basic purchasing power increase by 4.9% in real terms in 2022-2023, against 3.8% for the less. private. So it was a settlement that worked modestly in favor of leveling – but on a scale far too modest to do much to offset the impact of the previous decade which tended to favor richer areas.

As Sir Stephen Houghton (Lab), Chairman of the Municipal Authorities Special Interest Group, said: “The additional funding, especially for social care, is welcome, but must be the start of a sustained increase for help support the government’s ‘leveling up’ agenda.

And County Councils Network finance spokesman Carl Les (Con) warned counties would still face a £ 700million funding gap next year. “The distribution of this funding… to some extent reflects the acute pressures faced by boards providing social care services,” he said. “However, the allocations for SCC member boards are slightly lower than expected.”

To put into context the relative generosity of the 2022-2023 regulation, the IFS notes that while the baseline purchasing power for this year may be 2.1% higher in real terms than in 2015-16, when the population growth is taken into account, it is 2.2% decrease in real terms. Of course, population growth has not been uniform, which is problematic when in the persistent absence of a fair funding review that materializes, the 2013-2014 data is still used as the basis for settling the debt. funding. Since then, according to the IFS, the population of Tower Hamlets LBC has grown by 21% while that of Blackpool Council has declined by 2%. Government rhetoric of course suggests that it is the Lancashire seaside resort that should be the ‘left behind’ beneficiary of the leveling rather than the home of Canary Wharf and the Tower of London, regardless of the vast chasms of prosperity in east London.

The fair funding review, due to addressing these inequalities, has been postponed several times since 2019. However, a consultation on the funding formula is now scheduled to take place early this year. While the settlement document reaffirms the government’s commitment to ensure that “fund allocations for councils are based on an up-to-date assessment of their needs and resources”, it is difficult to see a redistribution of funds having any effect. dramatic impact ahead of the next general election. Stability was favored over leveling up.

When we talk about stability, we are talking about a stable decline in local public services, rather than stable growth. “This is still a long way from what is required,” was the verdict of Martin Reeves, finance spokesman for the Society of Local Authority Chief Executives & Senior Managers, on the settlement. And Association of Local Governments president James Jamieson (Con) said: “While the additional funding for social care for adults and children is good, it will not go far enough to meet the pressures that exist very much. realities facing these vital services. “

And the idea that this was a regulation guaranteeing stability must be questioned. Bearing in mind that Mr. Sunak gave all government departments a three-year financial settlement in October, it had been hoped that the councils would achieve the same. Alas, this was not the case. Is it ever?

The councils were simply told what the next year will bring, not knowing that the funding will be maintained thereafter. This is hardly conducive to long-term investment. If you employ an additional staff member, you may need to give them a P45 if next year’s regulations don’t provide the funding to support their work.

In addition, the fact that the financial regulations were handed over at the last possible moment, the afternoon of the start of the parliamentary recess, hardly gave a feeling of stability. Financial officers have faced a race against time to produce coherent budget proposals.

And, if public health is the most extensive service of local government, where was the news of the public health grant? Alas absent – more uncertainty for public health directors, even when they are working hard to do what they can to suppress Omicron.

Michael Gove is not a secretary of state known for his enthusiasm for stability. The 2022-2023 settlement was the settlement of a communities secretary who has yet to have enough time to advance his most pressing priorities. But we know Mr. Gove is a quick worker and an efficient minister.

This year’s one-year settlement will surely allow Mr. Gove to announce next year a more dramatic transfer of resources between councils which he says will help ease the leveling. The fact that we are approaching the end of this government’s mandate by then will mean that any displacement of resources will only have a limited impact before the next general election. This surely counts as a political failure on the part of the government.