Council of despair
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What is the main topic discussed in this episode?
Thank you for downloading this week's More or Less podcast. Here's Tim Harford.
Hello and welcome to More or Less, your numbers-eye view of the news. This week, how much should you be earning if you're a 43-year-old man called David? Why the UK's inflation target is set at between 1 and 3% and why we keep missing it? And more from our psychic Simeon Jack. We'll also be exposing a cunning media hoax.
So what I did was I took all the data on the number of mobile phone transmitter masts in each county in the United Kingdom, and then I showed that it has an extremely strong correlation to the number of births in these same regions.
But first, on Monday, the government announced that a key element of English local government funding would be cut by 9.9% in 2011-2012 and by 7.3% in 2012-2013. Speaking in Parliament, the Community Secretary, Eric Pickles, was emphasising a different number.
In fact, Mr Speaker, the average reduction in spending power for 2011-2012 is 4.4%.
There is a simple explanation for this. Councils have other sources of revenue beyond their grant from local government, so it is logically possible for a 9.9% fall in the government grant to lead to a 4.4% fall in average spending power. But the details of how the central government grants are calculated are fiendishly complicated. I asked Hugh Grover, the Director of Policy for London Councils, and one of the few people who seems to understand how it all works, er, how it all works.
Well, unfortunately, Tim, there's no... Really simple answer to that question because the world of local government finance is just so complex. But in big picture terms you could say that there are two main sources of funding for local government, putting aside things like fees and charges and their own interest from investments and so on. And those two main sources are council tax and government grant. Now council tax accounts for around £1 in every four of local government income, so around 75% comes through from central government grants. Now there are many grants streams from central government some 120 of them this year and that's being simplified dramatically for next year but one of the biggest of those grant streams is called the formula grant which in this current financial year amounts to around about 29 billion around half of local government funding that comes from central government formula grant is is distributed around the country according to a number of factors one of them obviously is per capita how many people live in the local authority another one is
the amount that the authority can raise locally through its council tax, and the third and probably most important is the relative local need for that authority relative to a threshold authority against which it judges all others, and currently that threshold authority is Wokingham. Wokingham? Why Wokingham? Well, according to the government's analysis, Wokingham is seen by them as the least relatively needy place in Britain, so they adjudge that it has the lowest needs per head for some of the basic services that local authorities deliver, such as education and social services. So, for instance, if you take into account the financial circumstances and all the changes this year, people in Hackney, which is one of the most needy places in England, will be receiving something in excess of £1,000 per head, while residents in Wokingham, as I've said, the least needy,
will receive only around about £125 a head.
So if everything compares to the least needy place in the country, Wokingham, what happens if Wokingham changes?
Yeah, well, that's a really interesting question. We did some research and analysis around this based on the 2008-09 local government finance settlement for formula grant. And what we discovered was actually very small changes in Wokingham can have a huge impact in the distribution of money. For instance, a 1% change in Wokingham's assessed need can cause almost £41 million of, and here I have to get slightly technical, undamped grant to move around England.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–4:46
2
How did the government announce cuts to English local government funding and what headline figures were used?
4:46–13:25
3
How does the formula grant work and why is Wokingham used as the benchmark?
13:25–21:11
4
What happens to national funding distribution if Wokingham's assessed need changes?
21:11–26:37
5
Why didn't ministers just apply a flat 10% cut and how does damping protect needy councils?
26:37–28:30