Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Rotherham Metropolitan Borough Council (LGB 26)

  1.  Thank you very much for giving Rotherham MBC an opportunity to provide evidence to this important enquiry.

  2.  Can I begin by saying that this Authority is fully supportive of the arguments advanced by SIGOMA in its manifesto "Prosperity for all—tackling social deprivation through the efficient targeting of resources". Some of these points are picked up below, but this letter also focuses on particular issues that are key for us, those mainly to do with desired changes to the grant system.


  3.  The integration and "joined up thinking" between the current grant system could be strengthened and streamlined. The official government statement that "SSA's are simply a means of distributing RSG and are not a good reflection of spending needs" and that "it is a Local Authority's responsibility and right to make its own spending decisions" do not fit neatly with pressure from some Government Department's to spend at SSA.

  4.  Hypothecation does not also fit well with the government's Best Value, CPA, PSA and Risk Management agendas. Hypothecation of SSA's (and Specific Grants for that matter) promotes the "silo effect" rather than more desirable Cross Cutting thematic working.

  5.  In line with local and national priorities, Rotherham has redirected resources towards Education and Social Services. (We spend 51.3 per cent of our net budget on Education—a higher proportion than 78 per cent of other Met Districts) But this has put enormous pressure on the rest of the Councils services, that is, those funded through the EPCS Block. In this context, hypothecation leads to less stability, not more stability.

  6.  A major difficulty for Rotherham is that its proportion of the England EPCS Control Total is considerably lower than its proportions of England Control Totals for each of the other SSA Blocks. This is shown quite starkly in Appendix A attached. The graph shows that since the introduction of the SSA system in 1990-91, Rotherham's share of the England EPCS control total has been significantly out of sync.

  7.  We ask for this "SSA Sub-Block imbalance" problem to be recognised. Further, we suggest a simple remedy—the inclusion of the "Index of Multiple Deprivation" (IMD) in the new EPCS formula. The Government has rightly used the IMD to distribute the Neighbourhood Renewal Fund. It should extend its use to the core revenue grant system. The IMD reflects 33 separate indicators, covering incomes, employment, health, education and training. It provides an equitable and sound mechanism for quantifying deprivation.


  8.  The relatively high levels of deprivation in some authorities, particularly in some Inner London Boroughs, has been long recognised. However the actual cost differences between authorities are not as great as the SSA formula suggests.

  9.  The variability in the present system represents a major flaw that should be rectified. There are two glaring illustrations. The Area Cost Adjustment (ACA) is perhaps the best example. However the EPCS SSA Block, shown below, is another :

District Level County Level
Westminster City Council360 107
Other Inner London Boroughs194 to 349 53 to 95
Outer London Boroughs107 to 235 34 to 59
Metropolitan Districts97 to 168 35 to 56
Shire Districts70 to 126
Shire Counties28 to 37

  10.  Regarding the ACA, colleagues at Coventry have performed analysis using the latest available official surveys of teachers' pay. This clearly demonstrates that only around 40 per cent of the ACA resources intended to enhance the pay of teachers in London are used for that purpose.

  11.  Coventry has also demonstrated that a significant fraction (20 per cent) of the resources distributed through the ACA are being used to keep down council taxes in London and the South East (approximately £260 million in 2001-02).

  12.  These are serious indictments against the present ACA mechanism. We urge the Government to quickly confirm the analysis and take corrective action when enacting its White Paper proposals.


  13.  In the current financial year Rotherham raises well under 25 per cent of its budget from Council Tax. We think that effective community leadership can be better exercised with more reasonable tax raising powers. There is overwhelming evidence (Layfield Committee, the Joseph Rowntree Foundation, the House of Commons Environment Sub-Committee and the Fabian Society etc) which shows local accountability and responsiveness are linked to tax raising power.


  14.  In Rotherham MBC, the five SSA blocks are added to by about 35 specific grants (some of which disaggregate further—like the Education Standards Fund) and a range of capital grants.

  15.  The Government continues its expansion of the use of Specific Grant funding into 2002-03, particularly in Education and Social Services. In 2002, ring fenced funding increased dramatically to 17 per cent of central funding of local authorities. It is difficult to reconcile these trends with the Government's claim that it wants to enhance local discretion and accountability.


  16.  We welcome the measures introduced by the Government to improve predictability and stability. These provide a good starting point but need to broadened and deepened.

  17.  The annual variation in grant settlements is a particular concern. Appendix B(i) attached shows how Rotherham's year on year per cent increase in SSA has varied in the range 0 per cent to over 7 per cent in the last 11 years. These settlements have not been easy to predict and have not produced stability. This claim can be backed up by looking at Rotherham's Met. District League Table position during that time. Our league table position shown in Appendix B(ii) attached has varied from position four (our best) to position 27 (our worst) out of 36.

  18.  In this context, as Ceilings and Floors will continue under Formula Grant, perhaps more attention needs to be given to reducing the present gap between them of three per cent. Our net budget is £254 million. A 3 per cent shortfall on that amount is about £7.5 million. A Formula Grant that can produce that kind of variation is contrary to the Government's desired stability objectives.


  19.  Rotherham, like many Met Districts, continues to lose SSA from data changes. According to SIGOMA, some £68 million has been moved away from the North to London and the South East, mainly as a result of data changes imposed in this years settlement. We trust this prolonged and damaging feature of the present distribution system will be adequately addressed when the White Paper provisions are enacted.


  19.  Rotherham continues to lose Revenue Support Grant due to the lack of a national Council Tax revaluation. Independent research by SIGOMA has estimated that Rotherham will lose out by up to £40.9 million over the period of 2001-02 to 2006-07 without a revaluation. The loss could be greater depending on the revaluation basis. The lack of a revaluation deprives Rotherham and SIGOMA authorities in general, of resources that would make a difference to communities.


  20.  The continued application of the 1978 Barnett formula in deriving the settlement, again deprives areas such as Rotherham. In 1999-2000 the comparative per capita figures were:

Northern Ireland


  21.  I hope these points are useful. Should you require further help or assistance please contact Andrew Towlerton on 01709 822784.

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