Is it fair that cities get more government funding than rural areas?

Stop whinging, Surrey. This is Box Hill. Image: Getty.

Last week the Centre for Cities submitted our response to the Government’s latest consultation in its Fair Funding Review for local government – its proposals for a new funding formula to determine how much grant funding councils should receive.

The purpose of the funding formula should be to secure a good standard of well-run public services across the country based on an assessment of need and demand for those services. Cities are home to the majority of people living in England – and what the government is proposing in relation to the formula, no matter how you look at it, fundamentally misjudges the needs of those cities. That is even starker when you remember that it is already set against a background of 10 years of grant cuts.

As with all things local government finance, the proposals are complicated. But local government minister Rishi Sunak made plain the intention when he responded to MPs’ questions about our Cities Outlook 2019 report. The Minister told MPs:

We heard a lot about Liverpool and a lot about Surrey. Members of this House should know that households in Liverpool have £400 more to spend on local services than households in Surrey. Only a third of spending in Liverpool is financed by council tax versus almost 85 per cent in Surrey. This funding formula is accurate and based on the facts.

In short, the government proposes allocating resources to places based on the size of their populations. While ostensibly this appears to reflect a more balanced allocation of local government funding, it does not adequately resource the higher levels of demand for public services that tend to be seen in cities, compared to other parts of England. Although the needs assessment in the consultation is currently focused on accessibility and remoteness, which does have a geographical bearing, it does not identify how demand for public services per capita is higher in some places more than others.

With that in mind, it’s worth unpacking the minister’s statement as there is quite a lot that sits within it. First, let’s look at spend.

That more is spent in Liverpool on a per head basis is undoubtedly true. And it is also true that while spending in cities has seen double the level of cuts that places elsewhere in Britain have experienced, cities still have higher spending on a per head basis than elsewhere. The cuts have served to close the gap between the two. On the face of it, this has increased fairness in the system. That’s certainly what the minister was suggesting.


But this ignores two big factors. The first is need. Because of the make-up of their population, need in cities is much higher than elsewhere. What we know is that demand for public services is much higher in poorer communities. What we also know is that these communities are clustered in cities. Of all the people living in the top 10 per cent most deprived communities in England, 83 per cent of them live in cities. By comparison, of the 10 per cent least deprived communities, just 40 per cent of residents live in cities. In Liverpool, close to half of its population live in England’s most deprived communities, while just 0.3 per cent lived in the country’s least deprived areas.

At the same time, cities are the most productive places in England, responsible for 65 per cent of economic output. They attract people in for employment, to shop, for tourism and to spend leisure time, placing additional demands on services in cities. The formula should therefore reflect the real geography of need across England, recognising that demand for local authority services is concentrated in cities.

Second, let’s look at the ability to raise money. It is true that Surrey does fund a greater proportion of spending through its council tax base. But this is due to the far higher cost of property in Surrey, particularly when compared to Liverpool. That Surrey has such a strong council tax base is in part because of the strength of neighbouring London’s economy, which generates the jobs that many of Surrey’s resident taxpayers take advantage of.

In contrast, Liverpool raises less money from council tax because lower housing costs simply mean the levels there are no match for those in Surrey. However how much funding cities can raise varies as well; York for example generates around a quarter of its income from sales fees and charges, which it is able to do thanks to a relatively wealthy population.

The question then is, how should the lower income of some cities be reflected in how government grant is distributed to local authorities?

First, it is clear that cities should be incentivised to permit new development, and both the New Homes Bonus and the part retention of business rates do just that.

Second, allowing local authorities in the capital to permit more development to both enlarge their budgets and support London’ economy further would be a good thing. But it is difficult to see a world where the level of taxes that can be raised locally has no bearing on how government grant is then distributed, seemingly making the minister’s point a little disingenuous.

Finally, while not all cities have higher levels of social and economic need, those that do should not be penalised for this. The government should distribute money for public services to the places that need it most, while at the same time working to reduce the causes of high demand.

Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.

 
 
 
 

The Fire Brigades Union’s statement on Theresa May’s resignation is completely damning

Grenfell Tower. Image: Getty.

Just after 10 this morning, Theresa May announced that she would resign as Britain’s prime minister on 7 June. A mere half an hour later, a statement from Royal Institute of British Architects president Ben Derbyshire arrived in my inbox with a ping:

“The news that Theresa May will step down as Prime Minister leaves the country in limbo while the clock ticks down to the latest deadline of 31 October. While much is uncertain, one thing remains clear – a no deal is no option for architecture or the wider construction sector. Whoever becomes the next Prime Minister must focus on taking the country forward with policies beyond Brexit that tackle the major challenges facing the country such as the housing crisis and climate change emergency.”

I was a bit baffled by this – why would the architecture profession try to get its thoughts into a political story? But then Merlin Fulcher of Architects Journal put me right:

Well you know construction is a larger contributor to GDP than financial services, and most of the work UK architects do is for export, and at least half of the largest practice (Foster + Partners) are EU, so there's a lot at stake

— Merlin Fulcher (@merlinfulcher) May 24, 2019

So, the thoughts of the RIBA president are an entirely legitimate thing to send to any construction sector-adjacent journalists who might be writing about today’s big news, and frankly I felt a little silly.

Someone else who should be feeling more than a little silly, though, is Theresa May herself. When listing her government’s achievements, such as they were, she included, setting up “the independent public inquiry into the tragedy at Grenfell Tower” – a fire in a West London public housing block in June 2017 – “to search for the truth, so nothing like it can ever happen again, and so the people who lost their lives that night are never forgotten”.

Matt Wrack, general secretary of the Fire Brigades Union, is having precisely none of this. Here’s his statement:

“Many of the underlying issues at Grenfell were due to unsafe conditions that had been allowed to fester under Tory governments and a council for which Theresa May bears ultimate responsibility. The inquiry she launched has kicked scrutiny of corporate and government interests into the long-grass, denying families and survivors justice, while allowing business as usual to continue for the wealthy. For the outgoing Prime Minister to suggest that her awful response to Grenfell is a proud part of her legacy is, frankly, disgraceful.”

A total of 72 people died in the Grenfell fire. At time of writing, nobody has been prosecuted.

Jonn Elledge is editor of CityMetric and the assistant editor of the New Statesman. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.

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