The funding formula for local government “needs dismantling and starting from scratch”, Parliament has been told.
Local government minister Simon Hoare was speaking during a House of Commons debate yesterday (18 April), where he said the need for wholesale change was recognised “across the two front benches”.
While any action will only take place in the next Parliament, Hoare noted that he was currently “talking to council leaderships across the country and to the wider sector about where we think the formula should land”.
On what form the changes could take, Hoare suggested that “such things as the use of data to inform, the ability to define need, the ability to respect and reflect upon the differentials in need demand in rural versus urban, and in coastal as well, should all play into that”.
Hoare said the current government had not instigated a major review of the formula for the sake of “post Covid stability”, which he said the sector had asked for. But the formula now “cannot be ignored, because we all want to find a robust and sustainable way forward, so that the future of English local government can continue for the next 25 to 50 years”.
Derbyshire ‘sound and stable’
Hoare’s comments were made during a debate tabled by Labour MP for Chesterfield Toby Perkins on “the vital issue” of Derbyshire County Council’s funding and governance.
Perkins described the “disgraceful and heartbreaking situation” of Derbyshire County Council’s budget being “less than half of what it was 14 years ago in real terms”, to £700m. He outlined the “material effect” funding cuts had had on the provision of services “and on people’s lives”, noting a forthcoming council decision on whether to go ahead with a proposal to close 10 children’s centres across the region it serves.
Perkins highlighted the impact on, and increasing demand for, children’s social care services and special education needs support, and pointed the finger at council leadership failings. He claimed that Derbyshire County Council had received around £17.5m of capital funding from the Department for Education (DfE) since 2019 for additional special school places, but had “spent a paltry £1.5m”. He added: “That means £16m, or 91% of the budget it has received, is sat in Derbyshire County Council’s coffers, while parents of special needs children lose sleep every night at the lack of provision in our county. It is nothing short of a betrayal of those parents and their children.”
Responding, Hoare said that Derbyshire was “in no way, shape or form on any red list or radar-flashing screen” at the Department for Levelling Up, Housing and Communities. On Perkins’ special school places comments, he said “colleagues in the DfE are aware of his remarks and concerns” and will respond “accordingly and appropriately”.
Hoare added that Derbyshire was “sound and stable financially”, which would allow it to make “informed and proper decisions and changes can be taken rather than knee-jerk reactions in response to pressures outwith the council’s control”. He also noted the council’s efforts to modernise and implement a “one council” way of working, as well as “new transformational strategic plans for the whole of Derbyshire […] that will drive efficiency”.
Finally, Hoare suggested that Perkins should “look not just at the cold figure of the money produced, as important as that is, in the local government finance settlement, but at the broader ranges of support and intervention that the government are providing across Derbyshire”.
Financial challenges remain
Earlier this year, Derbyshire County Council leader Barry Lewis outlined the authority’s “hugely challenging financial position” and the difficulty faced in setting its budget, which led to a number of cost control and savings measures being introduced.
A budget monitoring report presented at a March cabinet meeting showed that the council was facing an overall forecast overspend of £34.071m, as at 31 March 2024.
However, the savings initiatives that have been introduced are expected to address the deficit over the medium-term before the authority’s general reserve balance is depleted.
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