The County Councils Network has conceded that deprivation should be a factor in the calculation of base funding to local authorities.
The network made its comments in its response to the Ministry of Housing, Communities and Local Government (MHCLG) consultation on its Fair Funding Review, which will create a new basis for distributing resources to councils.
Publication of the proposals sparked an angry response from urban councils, which said they would be hit by the removal of the current deprivation measure in the foundation formula.
In its response, the County Councils Network, said: “Considering recent debate within the sector on deprivation we recognise that the government may wish to consider whether deprivation should be included…”
However, it said that this should only be done at a small weighting, if its inclusion was supported by evidence, and did not compromise the review’s principles of simplifying the system.
Paul Carter, chairman of the County Councils Network, said: “…if we are to see this review through – and if we are to grasp this opportunity – compromise and pragmatism on all sides of the local government sector, will be necessary.
“We hope other parts of the sector will do likewise.
“To this end, counties are willing to compromise and explore whether there could be a role for an evidence-based deprivation weighting in the foundation formula.”
However, the response to the consultation by SIGOMA, a coalition of metropolitan and unitary authorities outside London, said that deprivation should carry “at least the same weighting” as under the previous formula.
It said: “Whilst the average picture may be of a roughly even profile of spend per head, the proposed method of calculating distribution will, by MHCLG’s own measure, consistently and significantly underfund the poorest authorities to the benefit of wealthier ones.
“It would be fundamentally unfair not to include a deprivation weighting in the foundation formula.”
SIGOMA took issue with comments in MHCLG’s consultation that deprivation is “not a major cost driver for the services included in the foundation formula”.
These include services such as waste collection, libraries, parks, housing, planning and central administration.
It said: “We have worked on the basis that a factor must explain significant variances at authority level and it is our view that the notable variance in foundation formula service costs explained by deprivation is indeed significant.”
A response to the consultation by the Institute for Fiscal Studies said that the MHCLG’s proposal to base the foundation formula on population alone “is weak”.
It said: “The statistical results cited by the MHCLG are not strong enough to support such a decision.”
A foundation formula with only population as a cost driver is likely to shift funding from urban to suburban and rural areas, it concluded.
But it added: “it is worth noting that the overall impact of the Fair Funding Review on different areas will depend on a range of other factors including spending needs formulas for other areas, assessments of revenue-raising capacity, and transitional arrangements.”
In the House of Commons in February, communities secretary James Brokenshire said: “Obviously we will look at all the representations that continue to be made during the review of relative needs and resources, but our analysis in the review demonstrates that, overall, population is by far the most important cost driver for both the upper-tier and lower-tier foundation formulae.”
He said that, while in aggregate terms deprivation is not shown to be a major cost driver for the services included in the foundation formulae, “I am of the view that relative levels of deprivation remain an important cost driver for some specific service areas such as social care.”
