This report analyses the current funding system used to direct funding to different local authorities each year, revealing a system that is outdated, opaque and politically unsustainable.
The research reveals that the current formula not only relies on 1991 property values but also:
These methodological faults contribute directly to a flawed set of allocations to local authorities every year which is also highly regressive, benefiting more prosperous regions and adding disproportionate cost in poorer regions.
The Government has committed to a fundamental review of local government funding but this has been repeatedly delayed by the pandemic. Even in the absence of wholesale change, the report argues for the Government to introduce a funding floor, as recently introduced for school funding, to quickly bring the least well-resourced local authorities up to a respectable level.
If a funding floor were set at 90% of the average core spending power of local authorities, the estimated costs would be around £300 million a year, with around 30 poorer local authorities mainly based in the Midlands and the North of England benefiting from the change. This would mean that underfunded councils receive increases in their per capita funding, but no area would lose out. York would receive £78 extra per capita, Leicestershire an extra £63 per head and Coventry £55 per head.
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