Final Settlement Offers Chance for Redemption as Confidence in MHCLG Sinks

Posted on December 13, 2018

The elimination of negative RSG, should it be brought forward next year, will undermine the confidence of deprived urban areas in this department’s ability to deliver a genuinely “fair” funding review.

With it, the Secretary of State has chosen to gift £153m to some of the richest authorities in the country on a basis that takes no account of local needs.

He has also chosen to divert an extra £16m to rural areas, despite an independent study by LG Futures, commissioned by the department and referenced in a consultation on the fair funding review that showed Rurality does not increase overall funding need.

While an additional £180m in levy surplus to be distributed on a needs basis sounds promising at face value and may go some way towards softening the blow, as ever, the devil may well be in the detail.

Regardless of its impact, it is set against a concerning pattern of behaviour whereby the department has consistently diverted funding away from the poorest areas.

Deprived areas outside London will have lost out on almost £1 billion since 2010 when austerity began, through negative RSG compensation, rural grant and transition grant.

Of the authorities that benefit from the elimination of negative RSG, 87% are shire districts with no social care responsibilities and 100% are more affluent than the English average according to MHCLG’s own measure.

Councils across the country are cutting to a bare minimum of statutory services, simply to keep up with growing demand for social care, and the most deprived areas where demand is greatest have been forced to make cuts far deeper than the most affluent.

In this context, the department’s priorities for this Settlement are entirely misplaced, just as they were in previous years when even the National Audit Office was compelled to investigate their tenuous justification for Transition Grant, which benefited many of the same authorities as this latest decision.

Through the public accounts committee, we recently learned that MHCLG don’t monitor whether council budgets are sufficient to meet the needs of local residents. They focus instead on whether an authority is able balance their budgets.

Any council can balance a budget if they close their eyes and cover their ears to the consequences for local residents. Local government has demonstrated time and again that it is better than that. But, for many, what may have started as a positive drive for efficiency is now simply a heart-breaking exercise in damage limitation.

It would have cost the department £2bn to eliminate negative RSG fairly based on a relative needs allocation to all authorities but this option was deemed “unaffordable”. This is despite repeated warnings from the LGA that the sector faces a £5.8bn funding gap by 2020 and despite the context of a recent £20bn funding boost being announced for the NHS.

Instead MHCLG have chosen to do so unfairly, compensating only those authorities whose relative needs are deemed so low that, according to the departments own funding methodology, they would have seen their share or redistributive funding reduced to less than zero.

The Secretary of State still has a window of opportunity in the final Settlement to restore the confidence of deprived areas and the wider sector and to demonstrate that Prime Minister’s mantra of “a country that works for everyone” is more than empty words, but that window is closing fast.

I want to believe that the damage being inflicted on local government is a result of short-sighted monitoring and not of a department wilfully closing its eyes to the consequences of the cuts. A lack of insight can be more easily fixed and forgiven than an absence of conscience.

But, whatever the case may be, the centre must open its eyes now, while there is still time to change course and before it loses our good faith entirely.

We are calling for the minister to either eliminate negative RSG fairly through a £2bn funding injection that benefits all local authorities on the basis of need, or not at all, using the £153m instead to support social care services.