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Tierful times
By Andrew Muter | 22 March 2017
Andrew Muter combines the district and county spending power figures and uncovers a worrying trend

L ocal government can now plan ahead with confidence, according to communities secretary Savid Javid.

The publication of the local government financial settlement sets out the level of resourcing and the core spending power available to councils over the next four years. Core spending power may feel like the camouflaging of significant funding cuts. It does, nevertheless, provide some interesting comparative information about what local government financing has become in 2017.

Two-tier local government often struggles to compare itself to unitary government. But by combining district and county spending power figures, it is possible to arrive at ‘whole county’ local government spending figures which can be compared to the whole of England.

One startling outcome of such comparisons is that all but one of the two-tier areas across England have a core spending power per dwelling below the average for English local government. Two-tier areas average a spending power per dwelling of £1,659 – 11.4% below the England average of £1,826. 26 of the 27 two-tier areas are below the average for local government, suggesting the challenges faced by two-tier local government are exacerbated by a historic systemic fault in the allocation of funding. The only two-tier area with a core spending power above the average is Surrey, with a figure of £1,948 per dwelling.

By analysing districts and counties together in their county groupings, it is possible to identify the gap between current core spending power and the England average.

Across all two-tier areas this amounts to an annual funding gap of £1.9bn. A traditional response has been to point to the greater cost of service provision in metropolitan areas because of higher infrastructure costs and higher levels of deprivation. Evidence of the additional cost of rural services has made less impact on funding distribution. But no matter how well such arguments are framed, it is easy to spot the link between the seismic impact of the Brexit vote and the underfunding of the towns and countryside that make up non-metropolitan England.

Hampshire has the greatest gap between its current core spending power and the average – it would need another £180m per year to equal the average. The East Midlands region looks like the biggest loser with all five of its two-tier county areas in the top ten of core spending funding gaps, almost half a billion pounds a year short of the average (box 1).

Box 1
Two-tier area Core spending gap
Local Gov Hantmpshire -£180,356,103
Local Gov Staffordshire -£137,816,881
Local Gov Kent -£126,870,552
Local Gov Lancashire -£117,556,666
Local Gov Derbyshire -£112,137,294
Local Gov Leicestershire -£107,496,873
Local Gov Essex -£102,380,651
Local Gov Lincolnshire -£91,988,977
Local Gov Nottinghamshire -£90,595,409
Local Gov Northamptonshire -£ 85,097,990
Projections for the next four years offer little comfort. The core spending gap widens by 2019/20 for 18 of the 27 two-tier areas. Districts see their spending power reducing by an average 10% over this period, a result of the transfer of New Homes Bonus funds to county authorities. And while counties benefit from this switch and an increase in Better Care Fund, two-thirds of county areas still fall further behind as average core spending power increases nationally. Staffordshire and Leicestershire have the biggest challenges in terms of core spending power at around 80% of the England average.

Unsurprisingly, eight London boroughs feature in the core spending power top ten. Although Wandsworth LBC is at the bottom of the table, London figures do not include the additional spending at Greater London Authority level. Other cities including Liverpool, Birmingham and Manchester also have above average core spending figures (box 2).

Box 2
Authority Top 10 core spending power per dwelling (19/20)
City of London £4,610
Isles of Scilly £4,180
Hackney £2,297
Newham £2,292
Camden £2,260
Knowsley £2,230
Tower Hamlets £2,219
Brent £2,169
Haringey £2,094
Islington £2,092
Those who have argued against the shift in New Homes Bonus towards counties will feel vindicated. It’s clear that two-tier local government is significantly underfunded in comparison with unitary local government and shifting resources between the tiers fails to address this.

One question remains unanswered. If two-tier local government is so poorly funded, why haven’t we seen more evidence of catastrophic service failure in these areas? The answer may lie in the agility of districts in transforming themselves and in the ability of counties to focus on the big strategic challenges in adult social care and children’s services. It may just be that today’s orthodoxy is wrong. Scale and unitarisation may look like the way ahead but maybe two tier local government is the right answer for efficient, agile local government.

Andrew Muter is chief executive of Newark & Sherwood DC