Counties welcome fair funding proposals but argue new formula must be able to fund social care pressures

CCN Latest News | 13 March 2018

The County Councils Network is ‘very supportive’ of the direction of travel laid out in the government’s latest fair funding review, but the network said the new formula must be capable of addressing spikes in demand for social care services.

In its response to the government’s latest fair funding review consultation, on measuring relative need, CCN said many of the proposals are a ‘welcome step in the right direction’.

You can read the consultation response here.

County leaders have long argued for a simple formula based on the genuine costs of delivering services, and this consultation outline moves towards this through the Foundation Formula. In particular, it is welcome that Ministers have proposed to give rurality a higher profile as one of the three main key cost drivers.

CCN agrees that rurality, population growth, and deprivation are the three main cost drivers. The recognition that population projections are a key cost driver is likely to benefit county areas, home to the largest and fastest growing elderly population, with the county authorities facing the most acute social care demand.

However, this must be a formula that is capable of funding and responding to growth in social care pressures, CCN argues.

Therefore, the new formula should be able to address spikes in specific client groups, such as over 85s, otherwise this could leave counties exposed to ‘considerable financial risk’. CCN said that it wants to work with government to help devise a method to address unforeseen and large growth in care costs.

This is crucial in county areas, which are facing a projected increase in over 85s of 16.1% between 2021 and 2025 – higher than any other part of the country.

The submission from CCN recognises that deprivation is a key cost driver. However, the network warns that the current weighting given to it is ‘excessive’.

CCN believes deprivation funding should be only as large as evidence supports, but the network welcomes proposed to widen out the definition of deprivation beyond income-deprivation, as in many county areas, deprivation means low-paid individuals rather than benefit claimants.

CCN’s submission also highlights one of the reasons there is a rural v urban divide in local authorities’ funding currently is because density’s weighting in the present formula is eight times the amount of funding for sparsity, despite a recognition that rurality presents extra costs in delivering services. County leaders urge the government to consider how to address this, including consideration of excluding, or significantly reducing, the weighting for density.

The submission argues that for the fair funding review to be a success the Government must provide additional resources as part of the Spending Review.

Without new funding, CCN’s submission argues, there will clearly be ‘winners and losers’ from a new formula. The network has argued for extra resource to close the funding gap, but warned that the fair funding review must lead to a new ‘needs-led’ formula regardless of whether new resource is made available or not.

More widely, the submission argues that while CCN are supportive of the move towards greater retention of the estimated £26bn in business rates, designing a system that ensures sufficient funding and incentives for local government will be essential. This includes “ensuring that the system is designed to prevent unsustainable funding and misaligned incentives” relating to the levy on growth, resets and the tier-shares.

They are also argue that the New Homes Bonus must be reviewed as part of the fair funding review and wider spending review. Government should consider the future of this policy as a whole and, in particular, how it operates in two-tier areas.

Cllr Nick Rushton, local government finance spokesman for the County Councils Network, said:

 “County leaders will no doubt be very supportive of the direction of travel of the fair funding review, as outlined in this latest consultation. Proposals to create simpler evidence based formula, with fewer indicators, as well as the recognition that rurality is one of the main cost drivers in delivering services in some counties, are welcome. 

“Population and the local age profile are rightly highlighted as key cost drivers. This is important, as when the new formula is introduced in 2021, it will be seven years since population data was last updated. We have concerns that many counties will be exposed to considerable financial risk in delivering social care services unless the formula address the extra cost that comes with an aging population who are most likely to use care services.

 “This is a once in a generation opportunity to reform the system for the better.  If we focus on the evidence and avoid introducing unnecessary complexity we may actually make something that stands the test of time. If not we will be back here sooner than we think.”