This page highlights how deprivation measures are currently used in allocating local government funding and shows the differing levels of deprivation across the country using the Indices of Deprivation.

How is deprivation used in funding local government?

Deprivation describes the lack of material benefits, such as a job, income, decent home and education, that are generally considered to be necessary in a society.

Relative levels of deprivation are a crucial determinant of ‘need’ for many of the services that local authorities provide. There are strong, well-established relationships between the degree of deprivation within an authority and the amount an authority spends in order to maintain the same level of services.

Deprivation is the key driver of need in many demand-led services and a key cost driver in the current local government funding formulas and significantly affects the distribution of funding. Measures of deprivation are used in adjusting funding for Social services, Children’s services, Environmental services, Fire and Rescue services and the police.

Deprivation across England

The most widely used measure of deprivation in England is the Index of Multiple Deprivation (IMD).  This index draws together information from seven sources of official data, known as 'domains', to produce an overall measure of relative deprivation between one area and another. Each of these domains are themselves a combination of a range of indicators and you can find out more about them here. The domains are combined in the overall index using the following weights:

The Index of Multiple Deprivation (IMD) ranks every small area (of roughly 1,500 people) in England from 1 (the most deprived area) to 32,844 (the least deprived area). Local Authority summary scores are also produced.

Deprivation is not spread evenly across the country. The index shows us that pockets of more deprived areas tend to 'cluster' and that metropolitan areas tend to have more deprived areas than other areas of the country. The North East, London, and the North West all have a higher average score and are therefore more deprived compared with other areas of the country.

Implications for the Fair Funding Review

London Councils believes deprivation should continue to play a central role in any new local government funding formula.

With the introduction of Universal Credit planned for 2022, many of the deprivation measures used in the existing formula that rely on welfare measures are not yet available consistently across the country. The government is therefore looking at alternative deprivation measures, which are likely to include the Indices of Deprivation due to be updated in 2019.

London Councils has particular concerns that the higher costs of housing within London and other towns and cities are not properly reflected in the current Indices of Deprivation and that this could significantly understate the true levels of poverty within the capital. When the costs of housing are taken into account London has median income lower than the national average

Whichever measures of income deprivation are used: the impact of housing costs must be reflected.

Back to Population   Area cost adjustment