Stephen Houghton

Consensus is key

Posted on December 06, 2017

As the Fair Funding Review of the local government finance system progresses, external observers may be surprised to learn of the broad consensus that exists between authority types on the overarching principles that should remain, namely that;

1) funding should be allocated according to demand for statutory services, and;

2) that differences in the ability to raise income locally should be taken into account.

The inevitable variation from one authority to the next in these two areas means that a fair share of funding will never equate to an equal share or, to put a finer point on it, that an equal share divided among authorities of unequal means and local demands is fundamentally unfair on local residents.

However, despite encouraging progress on this behind the scenes, recent claims made by the County Councils Network have done little to advance this understanding.

CCN have recently argued that counties “unfairly subsidise services enjoyed in other parts of the country through higher council tax bills”.

The figures quoted by CCN in two recent papers  are contradictory and difficult to substantiate but of more concern are the underlying arguments, that:

  • any cross-subsidisation is intrinsically unfair and
  • the primary measure of fairness should be an equal share per head

According to Abdool Kara of the National Audit Office, county claims that their funding settlement was unfair because they received less money per head than London and metropolitan boroughs was “a (perhaps deliberate) partial recollection of history”.

However, while we can question their arguments and their figures, it is not difficult to empathise  to some degree with their motives. And this leads us to the bigger picture.

By 2020, local government as a whole will have faced an overall funding cut of 40%. According to Kara, this is creating an environment in which “different council groups – by type and by geography – are maneuvering to lobby for their unfair share”, driven by the “underlying fear’ [that] the fair funding review and business rate reforms [are] unlikely to fill the sector’s widening funding gaps.”

It is a context, in other words, in which the ‘winners’ of the fair funding review relative to other authorities could still be losers relative to their own historic allocations, and in which the stakes and therefore the pressure to make a compelling case are understandably heightened.

But the inadequacy of overall funding for local government, the reason some may be tempted to make the case for their “unfair share”, is precisely why we must resist that temptation as a sector.

Local government, now more than ever must work together to agree on a funding formula which we can all recognise as intrinsically fair, whether or not this may be to our individual disadvantage during a time of austerity. 

More important still, we must work together to make the case for fairer overall funding as forcefully as possible, because only the certainty that business rates reform will plug the sector’s widening funding gaps will truly liberate councils and their representatives to think objectively about fairer funding.