26th November 2013
Another quick diversion in our central – local series today but the topic seemed relevant.
On Thursday Sir Merrick Cockell hit the breakfast airwaves and TV studios to press the case for the reform of the Barnett formula. Although obscure, the Barnett formula, named after a former Chief Secretary to the Treasury named Joel, governs how over £50 billion of public spending is distributed between England, Scotland, Wales and Northern Ireland.
Sir Merrick and the LGA have been looking into the Barnett formula and have calculated that a change in the way the formula is calculated could mean an additional £4.1 billion flowing to England, largely at the expense of the public services of Scotland and Northern Ireland.
Rather surprisingly, especially as I am an English local government worker, this really irritated me.
This was for three main reasons. Firstly, this felt like the worst sort of beggar my neighbour politics; secondly the rationale underpinning the need for change (namely pressure on local government budgets caused by increases in social care costs) seemed particularly tenuous and thirdly because any argument about redistributing based on need should start with differences within the UK rather than picking on the receivers of public services in Scotland and Northern Ireland.
But before we push on let’s just be clear about this; the Barnett formula does need reforming and replacing with a better needs based formula. Allocating spending on the basis of suspiciously round numbers (The formula dictates that for every £1 the Government distributes, 85p goes to England, 10p to Scotland and 5p to Wales) that no longer match the need of the countries in question is patently silly.
But we’ve known this for years. The House of Lords published a report on the topic in 2009 and I remember it being an issue hotly debated when tuition fees were introduced for the first time in the early 2000s. So why did the LGA decide that now was the time to go after the Barnett Formula? Well, according to the press release:
The ageing population is increasing demand for council-run adult social care services by 3 per cent each year, meaning councils have to find an extra £400 million per annum to deliver adult social care. However, councils' central funding is being cut by 43 per cent (the equivalent of £20 billion) placing social services under enormous strain and leading to reductions in services and a tightening of eligibility criteria.
Sir Merrick Cockell, Chairman of the LGA said:
"The Barnett Formula has passed its use-by date
But instead of the answer to this challenge relating to proper funding of services across the board, structural reform or even better understanding of where the needs lie across the public sector the LGA decided to go after Scottish local authorities. An uncharitable response would be that this is a Tory councillor looking to use the Barnett formula as a useful policy distraction instead of dealing with the larger impact caused by a Tory government. However, Sir Merrick has generally been a strong advocate for local government so he deserves some slack here.
Now, I know that all public policy is about choices but I feel really uncomfortable advocating cuts to other local authorities to fund shortfalls in England. Of course, much like all other examples of beggar my neighbour politics this is a zero sum game and thus guaranteed to provide the shortest of short term fixes if no other changes are made.
Secondly, there is a real crisis in funding for adult social care and it needs to be fixed. But I’m not sure that crisis can be prayed in aid of every policy priority. As mentioned the Barnett formula covers more than £50 billion of spend. Who’s to say that any change in the formula would then lead to the money being allocated between public services in the same way it is now. What’s to stop Eric Pickles pulling out his ‘spending power’ calculator (a calculator that is more trixy than the enigma machine) and simply reducing the grant accordingly once more money comes back from Scotland? Changing the Barnett formula on its own does nothing to tackle this crisis and I find it a really odd focus on the LGA.
Finally, we all know that cuts to local authority budgets have fallen heaviest on the poorest local authority areas (with the occasional wealthy southern borough even seeing their grant go up) and yet the LGA were silent. Not once did they mention that this might not be appropriate and that money should probably follow need – an argument that is at the centre of this particular policy announcement.
I know why they didn’t do this; after all some of their members benefitted from the Government’s peculiar prioritisation. And yet, I still find the inconsistency hard to swallow. If we’re going to talk about money following needs then we should really start with making sure the Government don’t slash and burn the budgets of poorer local authorities rather than picking on the Scots whose only crime seems to be to have their own non-affiliated version of the LGA.
Overall, I don’t disagree that the Barnett formula needs fixing; and perhaps the fact that tackling it managed to get Sir Merrick on the TV makes the announcement worthwhile (although it did mean that his proper policy proposals around a national loan scheme were basically swallowed – spin over substance I fear) but I still find it surprising that our one and only local government body should think that reforming the Barnett formula is really a priority they should be spending more than a day or two talking about.