Memorandum by Rotherham Metropolitan Borough
Council (LGB 26)
1. Thank you very much for giving Rotherham
MBC an opportunity to provide evidence to this important enquiry.
2. Can I begin by saying that this Authority
is fully supportive of the arguments advanced by SIGOMA in its
manifesto "Prosperity for all—tackling social deprivation
through the efficient targeting of resources". Some of these
points are picked up below, but this letter also focuses on particular
issues that are key for us, those mainly to do with desired changes
to the grant system.
HYPOTHECATION/EPCS
BLOCK/IMD
3. The integration and "joined up thinking"
between the current grant system could be strengthened and streamlined.
The official government statement that "SSA's are simply
a means of distributing RSG and are not a good reflection of spending
needs" and that "it is a Local Authority's responsibility
and right to make its own spending decisions" do not fit
neatly with pressure from some Government Department's to spend
at SSA.
4. Hypothecation does not also fit well
with the government's Best Value, CPA, PSA and Risk Management
agendas. Hypothecation of SSA's (and Specific Grants for that
matter) promotes the "silo effect" rather than more
desirable Cross Cutting thematic working.
5. In line with local and national priorities,
Rotherham has redirected resources towards Education and Social
Services. (We spend 51.3 per cent of our net budget on Education—a
higher proportion than 78 per cent of other Met Districts) But
this has put enormous pressure on the rest of the Councils services,
that is, those funded through the EPCS Block. In this context,
hypothecation leads to less stability, not more stability.
6. A major difficulty for Rotherham is that
its proportion of the England EPCS Control Total is considerably
lower than its proportions of England Control Totals for each
of the other SSA Blocks. This is shown quite starkly in Appendix
A attached. The graph shows that since the introduction of the
SSA system in 1990-91, Rotherham's share of the England EPCS control
total has been significantly out of sync.
7. We ask for this "SSA Sub-Block imbalance"
problem to be recognised. Further, we suggest a simple remedy—the
inclusion of the "Index of Multiple Deprivation" (IMD)
in the new EPCS formula. The Government has rightly used the IMD
to distribute the Neighbourhood Renewal Fund. It should extend
its use to the core revenue grant system. The IMD reflects 33
separate indicators, covering incomes, employment, health, education
and training. It provides an equitable and sound mechanism for
quantifying deprivation.
VARIATION
8. The relatively high levels of deprivation
in some authorities, particularly in some Inner London Boroughs,
has been long recognised. However the actual cost differences
between authorities are not as great as the SSA formula suggests.
9. The variability in the present system
represents a major flaw that should be rectified. There are two
glaring illustrations. The Area Cost Adjustment (ACA) is perhaps
the best example. However the EPCS SSA Block, shown below, is
another :
EPCS SSA SUB-BLOCK
2002-03
| District Level |
County Level |
| £/Head | £/Head
|
| Westminster City Council | 360
| 107 |
| Other Inner London Boroughs | 194 to 349
| 53 to 95 |
| Outer London Boroughs | 107 to 235
| 34 to 59 |
| Metropolitan Districts | 97 to 168
| 35 to 56 |
| Shire Districts | 70 to 126
| |
| Shire Counties | 28 to 37 |
|
10. Regarding the ACA, colleagues at Coventry have performed
analysis using the latest available official surveys of teachers'
pay. This clearly demonstrates that only around 40 per cent of
the ACA resources intended to enhance the pay of teachers in London
are used for that purpose.
11. Coventry has also demonstrated that a significant
fraction (20 per cent) of the resources distributed through the
ACA are being used to keep down council taxes in London and the
South East (approximately £260 million in 2001-02).
12. These are serious indictments against the present
ACA mechanism. We urge the Government to quickly confirm the analysis
and take corrective action when enacting its White Paper proposals.
BALANCE OF
FUNDING
13. In the current financial year Rotherham raises well
under 25 per cent of its budget from Council Tax. We think that
effective community leadership can be better exercised with more
reasonable tax raising powers. There is overwhelming evidence
(Layfield Committee, the Joseph Rowntree Foundation, the House
of Commons Environment Sub-Committee and the Fabian Society etc)
which shows local accountability and responsiveness are linked
to tax raising power.
BALANCE OF
CONTROL/COMPLEXITY
OF FUNDING
STREAMS
14. In Rotherham MBC, the five SSA blocks are added to
by about 35 specific grants (some of which disaggregate further—like
the Education Standards Fund) and a range of capital grants.
15. The Government continues its expansion of the use
of Specific Grant funding into 2002-03, particularly in Education
and Social Services. In 2002, ring fenced funding increased dramatically
to 17 per cent of central funding of local authorities. It is
difficult to reconcile these trends with the Government's claim
that it wants to enhance local discretion and accountability.
PREDICTABILITY AND
STABILITY
16. We welcome the measures introduced by the Government
to improve predictability and stability. These provide a good
starting point but need to broadened and deepened.
17. The annual variation in grant settlements is a particular
concern. Appendix B(i) attached shows how Rotherham's year on
year per cent increase in SSA has varied in the range 0 per cent
to over 7 per cent in the last 11 years. These settlements have
not been easy to predict and have not produced stability. This
claim can be backed up by looking at Rotherham's Met. District
League Table position during that time. Our league table position
shown in Appendix B(ii) attached has varied from position four
(our best) to position 27 (our worst) out of 36.
18. In this context, as Ceilings and Floors will continue
under Formula Grant, perhaps more attention needs to be given
to reducing the present gap between them of three per cent. Our
net budget is £254 million. A 3 per cent shortfall on that
amount is about £7.5 million. A Formula Grant that can produce
that kind of variation is contrary to the Government's desired
stability objectives.
DATA CHANGES
19. Rotherham, like many Met Districts, continues to
lose SSA from data changes. According to SIGOMA, some £68
million has been moved away from the North to London and the South
East, mainly as a result of data changes imposed in this years
settlement. We trust this prolonged and damaging feature of the
present distribution system will be adequately addressed when
the White Paper provisions are enacted.
COUNCIL TAX
REVALUATION
19. Rotherham continues to lose Revenue Support Grant
due to the lack of a national Council Tax revaluation. Independent
research by SIGOMA has estimated that Rotherham will lose out
by up to £40.9 million over the period of 2001-02 to 2006-07
without a revaluation. The loss could be greater depending on
the revaluation basis. The lack of a revaluation deprives Rotherham
and SIGOMA authorities in general, of resources that would make
a difference to communities.
THE BARNETT
FORMULA
20. The continued application of the 1978 Barnett formula
in deriving the settlement, again deprives areas such as Rotherham.
In 1999-2000 the comparative per capita figures were:
Northern Ireland |
£5,939 |
| Scotland | £5,271 |
| Wales | £5,052 |
| England | £4,283 |
21. I hope these points are useful. Should you require
further help or assistance please contact Andrew Towlerton on
01709 822784.
| 
