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News - 21 November 2013

Local Government Association challenge spending formula

The Local Government Association (LGA), who represent councils in England and Wales,  have said that communities are being "short-changed" by £4.1bn a year under the model used to allocate central government funding across the UK.

They say the money should be "repatriated", and then be used to address the "crisis engulfing adult social care."

The formula was devised by the former Chief Secretary to the Treasury Lord Joel Barnett in the 1970’s and was supposed to be a short term settlement, but has been rendered more complicated over the years and made even more problematic with the introduction of devolution in Scotland and Wales.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“Criticised by the English for being unfair, by the Welsh for doing no favours to Wales and by Scotland for institutionalising Westminster hand-outs, the Barnett formula satisfies no-one.”

LGA chairman Sir Merrick Cockell said:
"The Barnett formula has passed its use-by date. What was only ever intended as a stop-gap solution has now become a major problem which is short-changing English communities and underfunding their public services by £4.1bn a year."

He continued by arguing that a "fair and equitable distribution of public money" across the UK was now needed, especially with the crisis in social care and the increase in demand for council-run adult social services. He called for a needs based formula and that the Chancellor should make provision for this in his Autumn Statement.

The LGA said that England's ageing population was increasing demand for council-run adult social care services by 3% each year, meaning councils would have to find an extra £400m per annum.

Meanwhile councils' central funding was "being cut by 43%", the LGA claimed, "placing social services under enormous strain and leading to reductions in services and a tightening of eligibility criteria".

The UK government disputes the LGA's analysis, arguing that central government funding cuts are offset by increases in "spending power".

This term encompasses a number of factors, including the retention by councils of a higher proportion of taxes levied on local businesses, and "bonus" funds for councils that approve the construction of new homes.

If you need any help and advice for your business on the implications of central and local Government Funding initiatives and the construction industry, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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