Response to the Formula Grant Consultation 2010

Formula Grant accounts for around 28 percent of the total revenue of London’s local authorities (including the MPA and LFEPA). Any changes that result from this consultation will apply from 2011/12 onwards, though the Government has not yet announced the duration of the next finance settlement period.

London Councils’ response to the consultation highlights the following points:

• Funding floors: The consultation must be viewed in the context of the challenges faced by local authorities as central government embarks on its programme of fiscal consolidation. Balancing reduced resources with increased demand for services requires funding stability; the Government can best provide this stability by setting funding floors at their highest possible level.
• General methodology: The Government has signalled that fundamental changes to grant distribution will be introduced from 2013-14. London Councils therefore opposes any unnecessary methodology changes being introduced in 2011-12 and 2012-13 which would create avoidable turbulence in funding.
• Area Cost Adjustment (ACA): Proposed changes to the ACA, which would see London lose £100m in undamped grant, are based on a method which underestimates local authorities’ labour costs and therefore penalise high-wage authorities such as those in London.
• Concessionary travel: London Councils has stated its preferred option for rolling the concessionary fares specific grant into formula. The proposed options suggested an increase in London’s undamped grant of between £67m and £247m.
• Data: Data should only be updated where it is now out-of-date (for example, population projections and day visitor numbers). Insufficient evidence was provided to warrant the removal of Bangladeshi pupils from the low-achieving ethnic group category.
• Four-block model: Proposed changes to the four-block model would improve its stability and transparency over the long term.

A copy of the full consultation response can be found below.