CIPFA IN THE MIDLANDS

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CIPFA IN THE MIDLANDS   27 JUNE 2002
Changes to the Revenue Grant System - Progress
So Far   Philip Walker Assistant Director
(Corporate Finance) Derby City Council
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Context to the Revenue Grant Review

• 4 year SSA freeze from 1999/00
• Finance Green Paper plans v formulae
• Significant changes during SSA freeze
  e.g. floors and
  ceilings/CTBSL/NRF/LPSA grants/new specific
  grants
• Growth of ring fenced grants
• Wider education reform agenda
• Parallel LG Bill 2002 changes

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Process 

• Most work from February to May 2002!
• Various groups
• - Overall system (RGDG)
• - Formula Sub-Group
• - separate education, police groups
• New CSR 2002 due 9 July 2002
• No exemplifications until late July 2002
• Further consultation until late September?

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The Overall System 

• Reintegration of specific grants
• Floors and ceilings
• Equalisation due to differences in
  standard/actual council tax
• Formula grant - merger of RSG and NNDR
• Targeted grants for fixed costs, sluggish costs,
  population change
• Treatment of data especially Census 1991 and
  2001

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Area Cost Adjustment - Options

• Variant of current approach (all)
• Elliott review variants (all)
• Specific cost options (teachers, fire)
• House prices variant (teachers)
• Geography in and outside current ACA area

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Area Cost Adjustment Key Issues

• Smoothing data (3 years average)
• Public/private sector data
• Occupation weights
• Treatment of high earners
• Labour Force Survey or NES
• Fringe weights in South East
• Lower limits on ACA across England

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Formula Sub-Group Services (1) 

• Overall approach is of incremental change
• Social services
• - focus on foster care adjustment, other adults
  formula, combined elderly measure, sparsity
• Fire move away from fire calls measure
• Highways full review of current formula

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Formula Sub-Group Services (2) - EPCS  

• Retention of expenditure based measures
• Regression intuitive approach to indicators
  review, especially IMD and income support
  measures
• New blocks for waste and transport?
• Quintile regression approach from ALG
• Further work on above plus density and sparsity

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Formula Sub-Group Services (3) - Capital 

• Abolition of interest receipts?
• No options for changing debt charges elements
• Government consultation on treatment of new debt
  over the summer
• Ongoing consultation with prudential guidelines?

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Education (1) The Wider Agenda 

• Split Schools LEA block linked to
  transparency on school spending
• Schools forum consultation
• Reserve powers
• Basic entitlement? F40 agenda
• Special/specific grants into formula

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Education (2) Schools and LEA blocks 

• Schools block
• - 88 of total (which is?)
• Will include income support English as
  additional language?
• Includes basic entitlement
• LEA block
• - More influence for sparsity
• High SEN block? (9 of schools, 6 of LEA?)

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Education (3) Key Factors influencing Outcome 

• Split between block shares
• Weightings within blocks (judgemental)
• Definition of new AEN HSEN
• Loss of lone parents current ethnicity
• Any shift in sparsity weighting
• Incorporation of specific grants into formula
• Treatment of ACA and impact on regressions
• Specific education damping?

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Overall Conclusions - General 

• Link to 1999 principles very unclear
• No clear link to government objectives
• Technical analysis is limited
• Lack of transparency in process
• Less effective local authority technical input
• Difficult to draw any conclusions over effect
• Politics matters more than technical work

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Overall Conclusions - Education 

• More fundamental, but highly subjective
  revisions to current funding
• Severe lack of transparency in process no
  exemplifications in July?
• New pressure to spend up to schools block
• Future increases in LEA block?
• Concerns over practicality for budget setting