THE NEED FOR ADDITIONAL FUNDING
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Funding allocations are inevitably based on out of date population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.
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.
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.
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.
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.
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.
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,
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
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.
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
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.
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
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.
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 servicessuch as children
and elderly relativespaying 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.
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.
If this figure is correct, it is a drop in the ocean, in comparison
to the needs of local governmentequating to only 0.001
per cent of total local government expenditure in 2005-06,
and the fund is suggested to cover all local public services,
including the police and the NHS, not just local government.
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 schemewhy 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.