Lambeth council leader Claire Holland, speaking as the representative of all London councils, today (1 August) warned that government plans to reform how local authorities are funded could have a “devastating” effect on the capital.
London Councils, the organisation that represents all 32 boroughs and the City of London, published research by the National Children’s Bureau that highlights how the housing crisis is not fully taken into account in the plans.
London boroughs could lose up to £1.5 billion if the plans are not amended.
London Councils said the proposed reforms to children’s services funding “dramatically underestimate” need in London.
Analysis from the National Children’s Bureau commissioned by the cross-party London Councils group concluded that the accuracy of the proposed children and young people’s services (CYPS) relative needs formula is questionable, the organisation said.
The proposals are part of wider reform of council funding allocations which are due to be implemented next year.
The government is consulting on the changes that London Councils say will be “make or break” for boroughs’ financial stability.
The National Children’s Bureau research found that the draft CYPS formula:
- “Has questionable overall robustness and accuracy” and is a unique way to calculate need, “with limited prior testing and proposed metrics that are not clearly correlated with need”.
- Involves a significant change in methodology, leading to substantial changes in the distribution of resources among local authorities.
- Measures deprivation through the income deprivation affecting children index (IDACI) that does not account for housing costs. “Communities with high levels of poverty driven by housing costs could lose out – and this is a particular concern for London,” comment London Councils.
- Measures deprivation through the number of children accessing free school meals – which also fails to account for housing costs.
- Uses a subjective measure of child health rather than a more objective measure that captures a broader range of need, like special educational need and disability (SEND) figures.
- Appears to replace “overcrowded housing” as a metric with “under-occupied housing” without explanation.
- Suggests using metrics on parents’ education levels – the only metric in the proposed formula relating to parental characteristics – as opposed to a child’s socio-economic context. “Crime data has a stronger correlation with children’s social care needs than parental qualifications, reflecting that crime rates in a given area are a more accurate and appropriate way of measuring need,” say London Councils.
London Councils’ analysis indicates £1.5 billion of funding could be redistributed away from the capital as a result, with all but one London borough seeing funding share decrease.
The new formula assumes London’s need for children’s services has decreased by nearly 40%, despite boroughs overspending on their children’s services budgets by more than £150m for each of the previous two years, and the 2021 census finding London had a bigger rise in its child population than the rest of England since 2011.
Boroughs say the new formula has been developed “behind closed doors” without sufficient scrutiny or testing.
London Councils estimates that the overall impact of the proposed reforms (factoring in all formulae changes) would see London boroughs receiving £700m less than they would under current arrangements.
This includes the children’s formula impact – which is negative for London – as well as proposed changes that London boroughs welcome, such as greater recognition of councils’ temporary accommodation pressures.
Cllr Holland, chair of London Councils, said: “We welcome the government’s intention to reform council funding since this is long overdue, and it is critical that funding is distributed fairly and efficiently on the basis of need.
“However, it’s clear there are serious issues with the proposed children’s services formula, which risks dramatically underestimating levels of need in London and other parts of the country.
“This would have a devastating impact on our ability to deliver vital local services, particularly for our most vulnerable children and young people.”
James Shutkever, social care programme lead at the National Children’s Bureau, urged the government to refine its proposals to ensure that they are based on need.
