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Possible impact of changes to the calculation of sparsity/rurality cost in the Fair Funding Review

At the Rural Services Network we recently sent to all of our local authority SPARSE-Rural members (for whom we carry out work and representations on the Local Government Funding Formula) a report from our Finance Consultants - Pixel setting out their modelling of the possible impact of changes to the calculation of sparsity/rurality cost in the Fair Funding Review

The changes, if implemented, would mean significant reductions for rural District/Borough Councils in allowances for sparsity/rurality in the Needs element of the Formula. We advised members to raise these issues with their local MPs whilst we nationally would take up the issues through the Rural Fair Share Group of MPs and directly

We understand, of course, that at present supporting people, communities and businesses with the impacts of COVID 19 and the responses to the pandemic is the number one priority for Leaders, Councillors and Officers. However, we felt it only right to bring to their attention the issues raised by Pixel.

We, and Pixel, have had a few questions from local authorities about whether the Fair Funding Review is still likely to be implemented in 2021-22.  In truth, we do not know, but it seems unlikely that Whitehall will have enough capacity to cope with the COVID-19 outbreak and make far-reaching policy changes, such as the Fair Funding Review.  Furthermore, it is difficult to equalise council tax or reset business rate baselines when there is no certainty about what those tax streams will be in either 2020-21 or 2021-22.  And lastly, authorities themselves will not be in a position to cope with any large reductions in their resources in 2021-22 either.

However, unless and until MHCLG announce a postponement of the Fair Funding Review we have to keep working in the long-term interests of our members in terms of local government finance – and we will continue to do so while members on the ground concentrate on supporting their local communities.

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