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Isherwood: A fair local government funding formula for Wales

Speech in the National Assembly for Wales

"There are major problems of both fairness and adequacy in the way Welsh public services are funded at Local Government level. Whether it is in education, youth services, social services or elderly care, the absence of a level playing-field in Welsh Assembly Government funding across the 22 Local Authorities means that many people in Wales are not receiving the levels of service which they need and to which they are entitled.

The problem

This problem is due in large part to a flawed Local Government Funding Formula which generates huge variations in per capita funding - that is, funding per person - across Wales and means that local public services to local people are funded on the basis of where they live rather than what they need.

By weighting the un-hypothecated - or non ring-fenced - Revenue Support Grant and Non-domestic rates that an area receives for essential local services according to its comparative socio-economic variables, rather than reflecting the actual cost of providing public services, both the needs of individuals and the particular difficulties faced by communities in many parts of Wales are ignored.

In consequence, inequities in the provision of essential services across Wales are generated, despite Local Government reserves being raided and despite Council tax increases above both Standard Spending Assessment levels and inflation being loaded onto hardworking families and pensioners on fixed incomes - Council Tax increases that are already excessive because of the new burdens, taxes and bureaucracy loaded onto Councils' since 1997, a fact reflected in my growing post-bag on this issue.

For the purposes of this debate I am not going to talk in technical terms about rurality, sparsity, demographics or deprivation indices, but instead focus on bottom line reality as it affects real people, and in particular schoolchildren, the vulnerable and the elderly infirm in Wales today.

In the short time I have been in this place I have challenged Ministers on a number of occasions concerning the postcode lottery in public services across Wales, and on each occasion they have transferred the blame onto a lack of transparency by Local Councils'.

In some instances this is clearly true, but in too many instances Assembly statistics reveal a clear and direct correlation between local budgets for vital public services and the levels of overall per capita funding received by Local Authorities from this Welsh Assembly Government. As the Leader of one Welsh Council recently put it to me: "Local Authorities are the inheritors of Grant, not the generators of Grant".

Funding transparency by local Councils' without funding transparency by this Welsh Assembly Government will therefore be meaningless and misleading.


Time and again I have come across examples in my own region where the current funding formula has let down both service providers and users, although the problem also extends into other parts of Wales.

Take, for example, education finances in some sample Local Authorities for 2002/3, the last year for which Education Budget Statements are currently available.

In the all-Wales league table of delegated Council Education budgets - that is the funding per pupil received by schools' -

Flintshire ranked bottom at 22nd, closely correlating to 18th position in per capita Welsh Government funding. Despite this, in 2003/4 Flintshire has fallen to 21st position in the per capita Welsh Government funding league.

Wrexham ranked 19th, matching its 19th position in per capita Welsh Government funding. Despite this, in 2003/4 Wrexham remains at 19th position in the per capita Welsh Government funding league.

The Vale of Glamorgan ranked 20th, matching its 20th position in per capita Welsh Government funding. Despite this, in 2003/4 The Vale of Glamorgan remains at 20th position in the per capita Welsh Government funding league.

Monmouthshire ranked 17th, closely correlating to 22nd position in per capita Welsh Government funding. Despite this, in 2003/4 Monmouthshire remains at 22nd position in the per capita Welsh Government funding league.

In 2002/2003 the difference between the amounts spent by the lowest and highest spenders was £785 per pupil. In fact, for Primary schools the difference is over £900, enough to fund a basic computer for every child! The Welsh Assembly Government must look at the basic entitlement of all children, regardless of where they live, so that the quality of education in areas like Flintshire and Wrexham is not sacrificed on the altar of a misplaced funding dogma.

To neutralise the "lack of local Council transparency" argument I will focus for a moment on my own home County, Flintshire, where school budgets per pupil are the lowest in Wales and where the funding problem is most acute.

To quote the Director of Education:

"This reflects I believe the failure of the RSG formulae to reflect the needs of North East Wales. It is worthy of note that all inspection reports and evidence concludes that Flintshire provides for education a greater than the Wales average percentage of the total resources available."

In fact, 13 out of 22 authorities spent a lower proportion of their overall net revenue expenditure on education than Flintshire, and 11 authorities retained a greater proportion of their total education budgets on a non-delegated basis in County Hall. It should be noted that a £15.5 million backlog in urgent school maintenance and repairs has also been identified in Flintshire.

Flintshire is penalised primarily because average incomes are amongst the highest in Wales, despite their being below the average across the border in England and regardless of the public service needs of vulnerable local people.

The logistics surrounding the way the funding formula is administered must also be questioned.

Several recurring themes have been raised with me by Headteachers in North East Wales.

They ask why schools can not be given more information about the budgets earlier so that they can plan longer-term strategies in the interest of the school? If staff knew earlier how much funding they would receive, then a school could operate more effectively, providing a higher standard of service to pupils.

They ask why there is a lack of openness and transparency about the way that budgets are delegated to schools'? Again, if schools were more informed then they would be able to offer a better service and make more effective use of their resources.

And they ask why budgets for specific parts of education are not ring-fenced? Again, that would assist schools with planning and structuring resources.

One headteacher gave a clear example of the problems caused by the existing funding formula by reference to the Workload agreement. Whilst this should allow for extra staff to ease the burden of the workload, in reality funding is so insufficient that in schools in North East Wales it will merely reduce the deficit, propping up the existing staff.

These are clear examples in the education sector of the disgruntlement with the current funding formula. It is not only the quantity of money that education professionals are unhappy with - it is also the way in which the methodology acts to the detriment of their pupils'.

But it is not just education where there are problems. In Social Services, problems, often the same problems, arise time after time. The much-documented case of Care Home beds is noticeably affected by the Local Government Funding Formula. Of almost 800 beds lost in Wales in the last twelve months, it is no coincidence that half have been in North Wales and that 30% of all Care Home bed losses have been in North East Wales - with the elderly infirm in this corner of Wales paying a disproportionate price.

It can also be no coincidence that Flintshire and Wrexham are the only Welsh Counties unable to provide direct funding for "Snap Cymru", the organisation that provides independent parental support in Special Needs education.

How to solve this problem?

It is self-evident that those Local Authorities which receive least have the least to spend and that the funding provided by Central Government to Local Government should therefore reflect the actual cost of providing public services, and that alone. We cannot continue to top-slice Council budgets on the basis of an unfair and damaging formula that ignores real local needs.

Issues relating to low income and deprivation should not be funded on a geographic basis by schoolchildren, by the vulnerable and by the elderly in care, but directly by Central Government.

Why should Mrs Jones' children have poorer funding because they live in Holywell and why should Mrs Jones herself have to worry about not being able to get a care home bed because of where she lives?

It is time for this Government to come to its senses, to replace this postcode lottery with a level playing-field and to introduce a fair funding formula that recognises the needs of all the people of Wales."

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