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Newcastle Liberal Democrat councillors protest at local government funding settlement

January 17, 2015 3:41 PM
By David Faulkner

On behalf of Liberal Democrats in Newcastle, Cllr David Faulkner has writtento the Department of Communities and Local Government on the 2015/16 draft funding settlement for local government. He's also drawn comparisons with the south eastern town of Wokingham to illustarte the impact of changes. He wrote :

"We share the sense of grievance and unfairness about the local government funding system expressed by politicians of most parties, particularly in urban areas and other areas of high deprivation. This unfairness is once again manifested in the proposed annual settlement.

"We cannot accept that councils with the highest levels of funding (reflecting disadvantage and higher needs) must face disproportionately higher reductions expressed in terms of the SFA and even more so in terms of Revenue Spending Power.

"We endorse the information separately provided by Newcastle City Council, in statistical, tabular and "heat map" form that exemplifies that unfairness.

"We wish to see a funding system that in a meaningful way reflects need; instead we see the gradual erosion of any such element in the revenue support grant so that eventually it will end up a simply being a per capita grant.

"We wish to see necessary reductions based on either fairly applied (cash) per capita or equal percentage reductions, taking all sources of funding available to councils into account; also full funding of any extra burdens on local government and an end to top-slicing the total available for distribution.

"We see none of these features in the proposed 2015/16 settlement."

How and why do the huge differences in "Revenue Spending Power" between richer and poorer authorities occur?

If we take the usual comparisons of Newcastle with Wokingham you can see from below that Wokingham also get big cuts in their % Settlement Funding Assessment (SFA) - though not as big as in the areas of higher need. the underlying issue here is the "extra" funding bestowed on cities / inner London / the North to reflect additional need under the previous system has been stripped away and replaced with a more "equitable" per capita funding system in which the south does a little better, after being relatively under-funded under the previous system. Given that the North / cities got the lion's share of the pot in the past, the inevitable consequence is that they face the lion's share of the reductions. The previous "need" element is being slowly factored out as funding moves towards a per capita basis. If this has to happen because of the need to reduce public spending while increasing spending on the NHS and international aid, we ask for equal cash amount cuts (which Tories would never agree to) or next best, which is equal percentage grant cuts.

The Settlement Funding Assessment replaced what was previously called Formula Grant and comprises Revenue Support Grant plus the local share of business rates redistributed from the centre. SFA is effectively "no strings attached" - the council decides how it spends it - but of course some has to go on fulfilling statutory obligations.

Newcastle City Council Wokingham
Population 280,000 157,000
SFA 14/15 - £178.9m, or £1433 per dwelling £28.2m or £446 per dwelling
(Represents a 10% cut on the previous year) (8.6% cut)
SFA 15/16 - £153m, or £1226 per dwelling £25.4m OR £400 per dwelling
(Represents a 14.4% cut on 14/15) (10.1% cut)

So how does these SFA settlement % changes turn into a different set of figures for what the Government calls "Revenue Spending Power"?

Revenue Spending Power is not just the grant available. It represents all the resources available to a council - SFA plus council tax, specific grants (see below), New Homes Bonus, funding for social care/the Better Care Fund (much effectively spent via the NHS) and the ring-fenced public health grant.

Wokingham has a similar level of Band D council tax level to Newcastle but because its properties are vastly more skewed to the higher council bands and ours to the lower ones, then its average council tax income PER DWELLING is so much more - £1574 against £807 in Newcastle this year. And it has been increasing its council tax too - so the income has been rising as well as the base being double.

They are also having many more houses built so they get more New Homes Bonus money - this is redistributed by the Government from a pot that has been created through "top-slicing" (the Government reduces the total amount that would have been available to local government and distributed via the Revenue Support Grant (with at least some element of need still in it) and instead gives it to councils based on the number of new homes built, as if this is some kind of incentive to the councils.)

In addition to the "without strings" SFA councils also get a whole range of other "specific grants", many of which are also for statutory functions but much more precise in HOW the money is spent.

In 2015/16 Newcastle will get £373m of specific grants, £4m GREATER than last year. Of this £142.6m is the Dedicated Schools Grant, £132.2m is housing benefit subsidy, £29.5m is PFI support grant - all these three are the same as last year, no inflation, but the next largest is the Public Health Grant which is £24m, being £2.7m up on last year.

Taking all things into account for Revenue Spending Power, Newcastle will have £2310 per dwelling available for 2015/16 whereas Wokingham will have £1581, so there is still more funding based on need, whatever people say.

However, for the reasons given above, the Newcastle Revenue Spending Power is 4.7% DOWN on last year, whereas WOKINGHAM is 2.7% UP. As a contribution to the total money it has available, Wokingham's SFA grant is a much smaller proportion than Newcastles, so any cuts there are offset by increases elsewhere, especially when are increasing an already high average council tax take.

No capital funding is in the Spending Power calculations nor other available income available to local authorities, such as sales, fees and charges - these vary according to council policy, emphasis etc but certainly there would be greater planning income in more affluent areas where more building is going on.