Skip to main content

Formula Grant Funding (Deprived Areas)

Volume 521: debated on Monday 17 January 2011

7. What assessment has been made of the likely effects on local authorities in areas of deprivation of reductions in formula grant funding. (33551)

We have delivered a fair funding settlement for local authorities that takes into account the particular circumstances of each area. Our proposals ensure that no authority sees a reduction in revenue spending power greater than 8.9% in each of the next two financial years.

The Minister apparently does not understand, or does not care about, the scale of the challenge facing constituents in deprived areas such as Sunderland. Does he seriously expect my constituents to be grateful for the hammering that they are taking in order to protect affluent areas such as Surrey?

I share the hon. Lady’s disappointment that the financial situation we face means that every part of the public sector has to take pain in order to put things right. The formula grant for Sunderland is £562 per head, and that means that for every £1 going to the less dependent authorities, Sunderland is getting £4.50. Her reduction of 8.9%, and of 4% next year, will in fact be an improvement because of the new homes bonus amounting to more than £500,000 this year.

I welcome the Department’s review of formula grant damping in time for 2013. Will the Minister consider the impact of damping on Norfolk county council, which next year will receive more than £20 million less than if the formula grant were given out on the basis of assessed need only? Will he ensure that from 2013 Norfolk gets a fairer funding deal as a result of this review?

I thank my hon. Friend for that question. The local government finance review will start later this month and will indeed produce a new determination of funding for local authorities that gives them much more freedom to spend and raise their revenue, starting from 2013.

In his appearance before the Select Committee on Communities and Local Government, the Secretary of State said that there was no need for local authorities to make cuts to front-line services, yet only last week the Conservative chair of the Local Government Association said that

“the level of spending reduction that councils are going to have to make goes way beyond anything that conventional efficiency drives, such as shared services, can achieve.”

If the Secretary of State and his team disagree, will the Minister tell us how many local authorities will be able to meet their budget cuts without cutting either jobs or front-line services?

It is obviously for every local authority to take its decisions on what services it supports with the money it has available. Councils will have much more freedom and flexibility, with the money that they do have, in making choices in future. It is for them to decide on their priorities.

I will take that as meaning none. As the Minister knows, in the real world, these huge front-loaded cuts cannot be made by efficiency savings alone. The Secretary of State and his team have said on many occasions that the settlement is fair. He said that it is progressive and that it protects the most vulnerable. The House of Commons Library has confirmed that the top 10% of most deprived areas are being hit with cuts four times worse than those in the best-off areas. To put it another way, while people in Hartlepool will lose £113 per head, residents in Wokingham will lose only £4 per head. Does the Minister still think that that is fair?

I say to the right hon. Lady that we have adjusted her formula grants to put a greater emphasis on the importance of deprivation—from 73% to 83%. Our banded floors mean that the percentage loss of formula grant for Hartlepool is lower than for Wokingham.