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Restoring trust to a broken system

January 25, 2013

Leader of Newcastle City Council Nick Forbes proposes an independent body to determine funding allocations for local government.

I agree with Eric Pickles. Not the Eric we see now, in charge of an opaque and politically-motivated local government settlement. But the Eric of a few years ago, an opposition spokesman, speaking in favour of an independent basis for the allocation of local government funding.

Eric’s views seem to have changed since he took charge of a systematic redistribution of resources away from councils with the highest needs. A complex funding process, understood by only a handful of people, makes it all too easy to conceal the political choices he is making, designed to load the greatest burden of cuts on the communities least able to withstand them.

In theory the allocation of resources is determined by a formula giving weight to relative need. But in practice ministers are able to make a wide range of adjustments which reflect other considerations. Over the last two years these changes have included the abolition of specific grants supporting areas of high unemployment, reductions in funding related to the numbers of children in care, incentives which top slice funding from all councils in favour of those with the fastest growth in housing and new businesses, a 10% cut in council tax benefits – with a steeper impact on areas with increasing benefit take up.

These and other adjustments have skewed resources away from areas with the highest need – from North to South and from urban to rural.

For the last few years Newcastle Council has been tracking these changes, through a series of “heat maps” showing where the cuts are falling. Work by the Joseph Rowntree Foundation and Audit Commission paints the same picture. The Government has not disputed our figures. But ministers’ response has been a diversionary tactic based on the absolute levels of grant received by councils. They repeatedly use the comparison between Newcastle and Wokingham, arguing – in effect – that steeper cuts are justified in Newcastle because we receive higher grant levels than a much more prosperous area, with far fewer social needs. The reality hidden by DCLG’s figures is that Newcastle will experience a loss of spending power of £218 per person over the 5 years of the coalition government, whilst Wokingham will lose just £27 per person. Over £1 billion being transferred from the North to the South and East, , with inner London also a significant loser.

I believe Ministers have proved insufficiently accountable for these decisions which are having a profound impact on public services across the country. They have failed to explain their rationale. Civil servants have given up any attempts at objective justification. The system is broken.

December’s local government finance announcement demonstrated the depths to which things have descended. In a time of diminishing resources £26billion of public money was allocated around the country through a fog of complex and opaque adjustments and misinformation. The future of libraries, leisure centres, social care services , infrastructure and the environment in every part of our country determined by a system that cannot be trusted and has long since departed from any sense of objectivity.

I am proposing a more independent process because my Council, and many others, have lost confidence in the government’s ability to make rational and objective judgements, to honestly account for the choices they have made and to explain them to the public. Instead I’d propose a new system in which:

  • The policy position of ministers are expressed openly and are subject to scrutiny
  • A wider range of influences can be brought to bear on the allocation of local resources, particularly from local Councillors, service users and partners.
  • We return to the former consensus, that allocations of funding between councils should primarily reflect their relative needs and the differential ability of local councils to raise local revenue
  • An independent body be commissioned jointly by central and local government to make proposals on these allocations, based on an objective analysis. This could be a new body, or an expanded remit for an existing body such as the Office for Budget Responsibility or the National Audit Office

This would guarantee freedom from backdoor political influence and establish a clear remit based on fairness, relative need, an assessment of the cost implications of new responsibilities being passed to local government, social and economic considerations, and differential income raising potential. Ministers could set out their policy objectives and require the independent body to meet them within the limits of their statutory remit. For example, if Ministers wanted to reward economic growth or direct resources to areas with higher numbers of children in care, or skew resources to rural areas or places with high unemployment, they would have the mechanism to do so – provided these objectives were explicit, transparent and subject to parliamentary scrutiny. The independent body would also receive evidence from councils themselves and from other bodies such as businesses, the voluntary sector and service users.

The creation of the Office for Budget Responsibility and the independence of the Bank of England show that national politicians do sometimes concede that good government can benefit from independent perspectives. This is a proposal that could achieve a wide consensus of support across local government and should be considered by all national parties ahead of the 2015 election.

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