Urban councils in the Midlands and north of England are expecting a “perverse” late adjustment to proposed funding reform which they fear would deprive them of hundreds of millions of pounds.
Concerns are focused on what has been described as a last minute Government decision to increase the impact of housing costs in an updated formula for measuring deprivation which would determine grants to local authorities.
The Special Interest Group of Municipal Authorities (Sigoma), which represents metropolitan authorities outside London, told the PA news agency its members have been told to expect the shift in emphasis before the new measure of poverty is published on Thursday.
Former deputy prime minister Angela Rayner announced the distribution of council funding would be changed this year to ensure funding was directed to areas with the highest levels of deprivation.
Councils in London have been lobbying the Government to include housing costs prominently in the formula.
This is due to high property values in the capital which impact on services such as children’s social care and temporary accommodation for the homeless.
With the consultation on the funding review having entered its final phase, Sigoma said 50 councils and more than 100 Labour MPs oppose London councils benefiting from the changes at the expense of other areas with high needs.
Citing sources involved in negotiations, The Times said London councils were “very pleased” with changes to their funding, with “significant progress” made in how it would be allocated.
Sigoma said that further weighting for housing costs in new indices of multiple deprivation (IMD), due to be published on Thursday, would “permanently” move huge levels of funding away from councils in the Midlands and the north.
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These authorities are said to have faced cuts that are 25% worse than the national average.
Sigoma dismissed property costs as a credible measure of local needs.
It said: “Including housing costs as an indicator of deprivation would be perverse as higher housing costs reflect buoyant house prices, higher levels of economic activity and extremely high levels of housing wealth.
“This proposal would allow London councils to continue to set very low council tax, effectively subsidising low bills for London residents.
“These proposals would significantly worsen the outcome for Sigoma councils, a dozen of whom could be set to lose out from the proposals despite representing the most deprived communities in England, and having experienced significant and disproportionate cuts in funding and increases in demand over the last 15 years.”
The group also challenged the new proposed inclusion of a “remoteness adjustment” in the formula aimed at supporting rural areas.
It argued the policy in its current form is based on a “weak theoretical case, lacks sufficient evidence justification and would divert vital funding away from some of the most deprived urban communities in England”.
Modelling by Sigoma showed the inclusion of remoteness would result in a collective loss in funding for its members totalling £300 million.
Sigoma chairman and Labour leader of Barnsley council, Sir Stephen Houghton, said: “This is a once-in-a-generation opportunity to put right the funding inequalities our communities have faced for too long.
“If councils cannot address funding gaps, they will inevitably be forced to cut costs — and more often than not, this will impact the frontline services that residents see and rely on every day, such as highways maintenance, grass cutting, and street cleaning.
“With more council tax increasingly directed toward the growing demand for vital services like social care, further funds are shifting away from the visible, everyday services that shape public perception and quality of life, on which voters make decisions.”
Sigoma has welcomed other funding review proposals, including the equalisation of council tax revenue and a new formula for children’s services which recognises factors such as overcrowding.
But the group has also raised concerns that the bespoke distribution of “recovery” funding, which targets areas with the highest needs, will be merged into the main government grant and distributed to all councils.
A spokesperson for the Ministry of Housing, Communities & Local Government said: “For too long families have faced ever-increasing bills while councils don’t get the support they need from government. We’re committed to fixing the outdated funding system we inherited, so that funding finally matches need.
“As part of our Plan for Change we will give people across the country the high-quality public services they deserve and ensure that funding is properly aligned with need.”
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