November 15, 2012 • 3:44 pm

“‘Politically targeted cuts’: Labour-run councils bearing brunt of coalition’s slashing spree.”

Daily Mirror, 14 November 2012

“Council cuts ‘targeted towards deprived areas’.”

Guardian, 14 November 2012

Opponents of the Coalition’s spending cuts were given ammunition this week as the Mirror and Guardian reported that the Government’s cuts to local authority grants were being target towards deprived areas, and that Labour councils were being hit hardest.

Both cited a report from Newcastle City Council, whose analysts were the apparent source of the estimates. So were their calculations right?

Finding the source

As is often the case, the Guardian helpfully links to the data they received from the Council, from which the cuts to every local authority were mapped against metrics such as the Index of Multiple Deprivation. They showed that the 50 worst affected areas by cuts to local funding since 2010 included high deprivation areas such as Hackney in London – which lost £266 per person.

This much was borne out when checking the Guardian’s numbers. But how were these cuts figures arrived at? Unfortunately, the Guardian didn’t have the data.

Full Fact has also asked Newcastle City Council for their working, but they haven’t yet responded to our request. Given that none of the data appears to have been published on the Council’s website, this leaves any reader who wants to check the claim in a seemingly impossible position.

This story isn’t new, however, and the Guardian were reporting similar figures a year ago, this time with somewhat more information published. This can give us at least some clues as to how the sums add up.

How the cuts are measured

As Full Fact found some time ago, calculating local government funding is a fraught business. There are two main ways (although by no means the only ways) that funding to local councils can be measured – through analysing ‘formula grants’ and through ‘revenue spending power’.

Formula grants are distributed across all local authorities with no strings attached - i.e. the councils can spend it on whatever they choose. But these don’t purely come directly from central government. According to the Government’s guidelines, they are made up of:

1) ‘Revenue support grant’ – this is funding directly from central government.

2) Business rates – these are initially collected by councils from local businesses as a contribution towards the cost of local public services. Central government then redistributes the pot.

3) ‘Principal formula police grant’ – this money comes from the Home Office to fund police authorities.

Meanwhile, ‘revenue spending power’ is the formula grant combined with council tax income, NHS social care funding and other specific grants that aren’t targeted by central government. In other words, it’s a measure of the total financing available to local authorities.

It’s arguable which measure here is is most useful, as while revenue spending power gives a fuller picture, for the purposes of analysing just the formula used by the Government to distribute funds centrally (which the reports focus on), we might only want to look at the formula grant itself to judge whether it’s inherently biased against more deprived areas.

Are the cuts biased against poorer areas?

While we can’t replicate Newcastle City Council’s maths until they make their data available, we can at least approximate the numbers and filter for both alternative measures.

The Council’s chosen measure uses the revenue spending power of each authority. To use Hackney as an example of a ‘hard hit’ Labour authority, it received £370 million of spending power in 2010-11. This has fallen to £310 million in 2012/13. Against a population of around 217,000, this amounts to a cut of £277 per person.

Meanwhile, spending power for a less-deprived comparable area such as Kensington and Chelsea fell from £217 million in 2010/11 to £195 million in 2012/13, amounting to a cut of £124 per person.

Using the same timeframe on the formula grants shows Hackney’s grant has fallen from £254 million to £208 million (£212 per person) and Kensington and Chelsea’s has fallen from £123 million to £99 million (£136 per person).

So there’s definitely a disparity. But why?

Put simply, more deprived areas rely more heavily on grants from central government, while the less deprived are supported by higher local council tax income. The House of Commons Library shows that since 2010, more deprived areas have lost out more on revenue spending power and non-ringfenced central government spending.

However, the formula grant alone hasn’t been as harsh on more deprived areas, as it takes into account relative needs such as local living costs and the deprivation index, relative resources which take into account local council tax bands, a central allocation given out on a per-person basis, and by providing a minimum ‘floor’ grant to protect authorities hit hard by the formula.

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