Select Committee on Communities and Local Government Committee Tenth Report

6  Government funding

109.  There are two areas of Government funding for migration and community cohesion: first, funding provided specifically for work to promote community cohesion and the integration of migrants; and secondly, funding provided for mainstream public services, which should fund any increased pressures on local public services from migration.

110.  The first area of funding comprises £50 million investment, over three years, announced by the Secretary of State in October 2007. The overwhelming majority of this money, £38.5 million, is allocated to local authorities through the new Area Based Grant—a non-ring-fenced general grant.[238] This funding is allocated to local authorities who have the lowest levels of cohesion. Westminster City Council pointed out that this funding is insufficient to make a significant difference: "the maximum allocation per authority in year 1 is £120,000 although some eligible councils will receive only £26,000—insufficient to fund even one full time equivalent post".[239] Out of the rest of this funding, a further £4.5 million funds activities for young people, £3 million has gone towards developing local capacity building, and the remainder relates to future decisions about the Connecting Communities Plus grant programme.[240] The additional funding allocated by the Government may be welcome; however, the £50 million investment is relatively small, and marginal to the funding debate, in comparison to the scale and need for funding in the second area—pressures on local public services.


111.  Migration may benefit the country as a whole economically; but this money is not automatically passed down to public services in the local areas most affected. Migration places two types of pressures on local services: pressures arising from the specific costs associated with the type of people moving into the area—migrants—and costs arising from the general increase in the population. Inward migration may lead to additional service pressures owing to the specific needs of migrants, for instance the need for translation or English language tuition. But the main cause of financial pressure is the increased number of people, which inevitably leads to increased pressures on, and costs to, public services. In the UK, funding for local public services comes primarily from central government, and funding allocations are based upon estimates of population size. The Statistics Commission, the independent body previously responsible for advising the Government on official statistics, pointed out that £100 billion a year is allocated on the basis of population statistics.[241] This funding affects local health, police and local government services. Approximately 76 per cent of local government expenditure is financed from central government grant.[242]

112.  Adequate funding for local public services to cope with migration is not only important for service delivery; it is vital for community cohesion. The LGA, and others, have expressed concerns that community cohesion can be negatively affected by the increased competition for resources created as a consequence of inadequate funding for migration.[243] The CIC found that the public were increasingly concerned about the fair allocation of public resources.[244] In areas where there is increasing competition for resources, such as access to social and affordable housing, and the Government does not provide adequate funding, it is easy to see how tensions can arise. It is of vital importance for effective service delivery and community cohesion that funding for local services adequately take into account the number of migrants.

Data flaws

113.  The inadequacy of UK population statistics is widely recognised. The main component of population growth in the UK is migration, explaining the central importance of accurate migration figures. The Treasury Committee, in its Report Counting the Population, concluded that the current local population estimates (mid-year population estimates) are not fit for purpose as they fail properly to account for internal migration.[245] The Secretary of State said "I entirely acknowledge that, because of the pace of change that has taken place, our data is not as up to date as it could be, or as comprehensive as it could be".[246] There are two main areas of concern about official population statistics: first, that the figures rapidly become out of date owing to the reliance on the census, conducted every 10 years; and secondly, that official statistics do not capture population churn within local areas. Local authorities expressed concern to us about the accuracy of statistics. Mr Blake-Herbert, Director of Finance, Slough Borough Council, told us that "according to the ONS, there are less children living in Slough than the number of children being paid child benefit".[247] Assuming that no mass benefit fraud is taking place, this example alone indicates that there are significant flaws in current official statistics.

114.  The second area of concern is that official statistics do not capture 'population churn', which is caused by the movement of people within the UK and from overseas. Mr Blake-Herbert remarked "it does not matter whether someone comes from Putney or from Poland" as it is the overall number of migrants that needs to be captured in estimates of local population.[248] Mr Allen, from the LGA, argued that local populations are often much higher than official statistics suggest because of this 'churn'.[249] Local populations may be much higher than official estimates because the figures do not include short-term overseas migrants who intend to stay for less than 12 months, which will include many of the new arrivals from the European Accession states. The Treasury Committee concluded that the absence of short-term migrants in population estimates did not fully meet the needs of local authorities.[250]

115.  The Office of National Statistics (ONS) is working to improve migration statistics, following a taskforce report in 2006.[251] Planned improvements include a rolling household survey which includes questions on migration, the inclusion of migration related questions in the Labour Force Survey, and the e-Borders project (which includes passport scanning).[252] The House of Lords Select Committee on Economic Affairs concluded that "it is too early to assess the effectiveness of the Government's measures to improve migration statistics, some of which will take many years to implement".[253]

116.  The LGA has welcomed the ONS's planned improvements to population statistics but has pointed out that it is estimated to take seven years for the improvements to have an impact. It advocates the use of local administrative data to check and adjust ONS estimates of local population.[254] The Secretary of State said that the LGA had suggested looking at National Insurance Numbers for worker registrations, GP registration numbers, benefit data and even the footfall in supermarkets.[255] The Treasury Committee has recommended that the Statistics Authority work with local authorities to identify alternative administrative data sources that can be used.[256] We recommend that Government urgently prioritise work to incorporate the use of alternative administrative data into local population estimates.


117.  Even if population and migration statistics are dramatically improved, there is still a need for additional funding for local government services that are under pressure from migration. Central government funding to local government is primarily allocated through a three-year funding settlement. Funding allocations are inevitably based on out of date population statistics: the settlement will not take into account the rapid population change experienced in some local areas during these three years. Two main proposals have been made to provide additional funding to local public services experiencing rapid migration. First, it is suggested that a contingency fund be established for local government. Secondly, the Government has announced that it plans to introduce a transitional fund for local public services from April 2009.[257] Both suggestions stem from an acceptance that there is a need for Government to respond to the immediate pressures placed on local communities who experience rapid change.

118.   The LGA has called for a contingency fund of £250 million for local authorities where there is evidence of particular pressures on services from migration.[258] This figure represents one per cent of the overall funding allocation to local government and reflects an approximate one per cent underestimate of actual population.[259] Funding allocations to local government are now made through a three year settlement. The main argument in favour of a contingency fund is that it provides a funding mechanism to respond to rapid population change in between decisions on the three-year settlements.[260]

119.  The Secretary of State explained that the Government is against the proposal for a contingency fund on three main grounds. First, the "stability and predictability of having a three year settlement" is important for local government and "if you were to create a contingency fund that money has to come from somewhere", which could result in less money in the settlement.[261] Secondly, an additional fund to local government is unnecessary as current funding allowed for a "whole range of contingencies". And thirdly, it is not realistic, as "even the LGA themselves were prepared to admit that they do not have the specific evidence, data and ability" to detail how the fund should operate.[262]

120.  In response to the Government's first argument, we agree that the introduction of three-year settlements to local government provides necessary stability, but we do not agree that a contingency fund would necessarily undermine this; the fund would not undermine stability if it were established as an additional funding pot, as the LGA suggests. Creating a new additional fund is not a new concept. There are a number of targeted grants to local government, such as the current community cohesion fund, and the basic need safety-value schools funding,[263] which provide funding in addition to funding allocated through the formula grant.

121.  In response to the Government's second argument, we recognise that there are some limited contingences built into the local government settlement, but as the Secretary of State herself acknowledged, these contingencies cover everything, from costs arising from waste pressures to those arising from the increased demand for social care for the elderly. The three-year funding settlement does not, and cannot, adequately take into account changes in population between settlement periods.

122.  The final argument against a migration contingency fund is that it would be difficult to set criteria for funding allocations. This is a difficulty that the Government manages successfully to overcome in the establishment of all its numerous existing funding schemes. We agree that it is important for the funding criteria to be fair and transparent and are confident that this can be achieved through close working with the local government sector.

123.  The Government and the LGA agree that the long-term solution is to improve the data that are used as the basis for resource allocations.[264] The dispute is on whether an additional fund is needed in the short term. Improvements in official statistics will take time. There is clear evidence showing that some local authorities have experienced unexpected service pressures from migration, which are currently left under-funded. We recognise that the Government has taken some measures to fund changing need. The introduction of an exceptional circumstances grant will provide extra money to schools that experience increases in pupil numbers between funding settlements.[265] However, the IPPR argued that this funding is limited and that most local authorities will be unable to benefit owing to the restrictive criteria on access.[266] Furthermore, this funding does not compensate schools for the provision of additional specialist support for migrants or compensate local authorities for the full range of service pressures caused by migration.

124.  Instead of setting up a contingency fund, the Government intends to establish a transitional fund for local public services, as outlined in the green paper on the immigration system, The path to citizenship.[267] The Government gives the following description of the fund:

Money for the fund will be raised through increases to certain fees for immigration applications, with migrants who tend to consume more in public services—such as children and elderly relatives—paying more than others. We will work closely across Government to develop a clear and transparent methodology for the appropriate surcharge. We would aim to raise tens of millions of pounds, with the fund operating from April 2009.[268]

125.  The Government's decision to establish a transitional fund may provide a mechanism for generating a small amount of much needed additional funding for local public services. However, the fund has limitations. First, the money that this fund will generate is very limited; press reports suggest that the fund would raise only £15 million.[269] If this figure is correct, it is a drop in the ocean, in comparison to the needs of local government—equating to only 0.001 per cent of total local government expenditure in 2005-06,[270] and the fund is suggested to cover all local public services, including the police and the NHS, not just local government.[271] Secondly, though the principle of asking migrants to pay towards local services is sound, the fund will not be paid into by all migrants. Only international migrants need visas, so EU citizens nor anyone moving within the UK will pay. This raises questions about the equity of the scheme—why should international migrants alone pay extra to fund local services under pressure from all migrants?

126.  We are not convinced that the Government's recently announced transitional fund will provide sufficient income to fund local public services under pressure from migration. We recommend that the Government immediately establish a contingency fund capable of responding effectively to the additional pressures which may be put on local government services from migration. The Government should work closely with the local government sector to develop appropriate funding criteria.

238   Communities and Local Government, The Government's Response to the Commission on Integration and Cohesion, February 2008, p 8. Back

239   Ev 159 Back

240   Communities and Local Government, The Government's Response to the Commission on Integration and Cohesion, February 2008, p 13. Back

241   The Statistics Commission, Statistics of International and Internal Migration, letter to the Minister of State at the Home Office and others, 8 May 2006. Back

242   House of Commons, Library Standard Note, January 2007, p 4. Back

243   Ev 128, 148. Back

244   Our Shared Future, para 2.46. Back

245   Treasury Committee, Eleventh Report of Session 2007-08, Counting the Population, HC 183, p 3. Back

246   Q 230 Back

247   Q 59 Back

248   Q 37 Back

249   Q 41 Back

250   Treasury Committee, Eleventh Report of Session 2007-08, Counting the Population, HC 183, para 83. Back

251   ONS, Report of the Inter-departmental Task Force on Migration Statistics, 15 December 2006. Back

252   Q 230 Back

253   House of Lords, The Economic Impact of Immigration, First Report of the Select Committee on Economic Affairs, Session 2007-08, HL Paper 82, para 40. Back

254   Ev 130 Back

255   Q 230 Back

256   Treasury Committee, Eleventh Report of Session 2007-08, Counting the Population, HC 183, para 85. Back

257   Communities and Local Government, Managing the Impacts of Migration: A Cross-Government Approach, June 2008, p 36. Back

258   Ev 131. See also Q 151. Back

259   Ev 131 Back

260   Q 54 Back

261   Q 243 Back

262   Q 243 Back

263   This fund delivers additional capital funding where an authority is facing exceptional circumstances because of the rate of growth of pupil numbers, or significant internal movement of population and demographic changes. Back

264   Q 243, and Q 55 Back

265   Ev 83 Back

266   Ev 121 Back

267   The Home Office, Border and Immigration Agency, The path to citizenship: Next Steps in Reforming the Immigration System, February 2008. Back

268   The Home Office, Border and Immigration Agency, The path to citizenship: Next Steps in Reforming the Immigration System, February 2008, para 207. Back

269   "British Citizenship Test Plans", BBC News Online, 20 February 2008,  Back

270   Communities and Local Government, Local Government Finance Key Facts: England, November 2007, p 5, Back

271   "Police to get extra funding to help with immigration costs", Guardian online, 17 April 2008, Back

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