The
response of the Liberal Democrat group in the National Assembly for Wales to
the review of the Standard Spending Assessment Formula for local Government
The Liberal Democrat group in the National Assembly for Wales recognises that the old formula used to calculate SSA was flawed and failed to meet the needs of Local Government in Wales. We believe that a new formula is essential.
1. However, we believe that it is important that the new formula does not reinforce inefficient or old spending patterns. Accordingly we would advocate that recommendation 15 of the Swansea University study is revisited and that quality measures are considered in some major service areas as a means of controlling differences in service standards.
2. Despite the recommendation of the Swansea University report, there is no proposed indicator for the number of the elderly population over the age of 65 in the Elderly care section. This causes some major discrepancies. Elderly Services is a very large service accounting for £282 million of expenditure in Wales. As the over 65 group contains a higher proportion of deprivation than many others and as their demand on services is disproportionate to their numbers it would make sense, if deprivation is to be a factor in the review, to amend the proposed indicators to include this additional factor. This would then even out the discrepancies and bring projected spend into line with actual.
We understand that the argument against this is that the regression analysis supports the existing proposal, but this is one of the services suffering because of lack of ward level data and therefore the analysis can only be tentative at best. Furthermore, the evidence on the ground does not support the regression analysis. Most Social Service Departments spend a large part of their budgets on the over-75s regardless of whether they fall into the indicator categories included in the new formula. There is an argument that indicators should be added to the formula for over 65s, over 75s and over 85s with greater weighting for the older age groups. This should then better reflect the actual spending pressures on Social Services.
3. The doubts over the use of regression techniques do apply throughout the formula review. The more that the new formula is tested against the real situation on the ground the more they appear to be flawed. One of the reasons for this is that they are often applied in a vacuum with no evidence to back up their conclusions. The example given in the document on school meals getting greater weighting because of rurality is a good example. Although on the face of it the argument employed makes perfect sense, in fact most rural schools have their own kitchens and cook the food on the premise thus negating the argument of greater transport costs.
The whole regression analysis is based on historical data and therefore reinforces previous under or over spending. For example, Cardiff has traditionally been a low spender on education. The formula will reduce the education-related figures even further. This expenditure pattern does not reflect need or demand but is the outcome of difficult settlements in the past. Similar examples will apply on other services to other Councils.
4. Although the road maintenance indicators are unchanged there is an argument that an indicator should be added to reflect usage. This will favour the urban areas with high traffic levels but proportionately higher maintenance costs as a result. There may be a need to look at the topographical difficulties of maintaining rural roads as well. Of course this does contradict the Assembly’s commitment to road traffic reduction but reflects the situation as experienced by local Councils.
5. The new formula does not contain indicators which account for greater transport costs caused by Welsh and Denominational schools. Although all local Councils will have Welsh medium schools not everyone has denominational schools and these can therefore account for discrepancies in expenditure.
6. The indicators in the formula for visitors assumes that the number of day visitors equals the same number as the night visitors. However, in Cardiff the actual number is about 4 times more day visitors than night visitors. The figure they give is 8,000 for day visitors when in fact there are about 25,000. This is also a factor, which can affect other regional centres and tourist destinations. We gather the reason given for not counting day visitors separately was that the DSG doubted the accuracy of the statistics but we believe that there are well known ways of estimating this which are accepted throughout the tourist industry and should be used here.
There is nothing allowed for net commuter flows. There are 4 places in Wales with net positive inward flows- Cardiff, Torfaen, Newport, and one other in N Wales. The net inward flow of commuters has the same impact as visitors in the main.
7. On this theme of regional centres, there is a cost to local councils of maintaining this status both in terms of expenditure on promotion and in other management factors. We believe that indicators should be put into the formula to reflect this. This is particularly the case when the regional centre concerned is a net contributor to the NNDR pool.
8. The figures for enhanced population are only used as a factor affecting cleansing and refuse disposal. It should also be applied to highways, cultural services, environmental health, trading standards, economic development etc.
9. The calculation is based on population estimates for 1998 while the 1999 figures are now available. This can make a big difference in some areas. The robustness of some of the core data is a cause for concern. The fact that much of it relies on the 1991 census means that it is out-of-date. The non-availability of some data particularly in social services also has an adverse impact on the accuracy of the formula. There is a need to gather this data over the next few years so as to inform and improve on the accurate calculation of SSA. However, this also has to be balanced with ensuring some stability in funding mechanisms. Accordingly, we favour a once off review of the formula once the 2001 census data becomes available incorporating other work rather than a year by year piecemeal review based on the work of the previous 12 months.
10. Approximately 10% of the population of Cardiff are students. This affects the deprivation indicator, as they are not entitled to benefit. Accordingly, this artificially reduces the numbers claiming benefit in Cardiff and in all the other university Cities and towns. We believe that account has to be taken of this in working out deprivation indices.
11. Local authorities in Objective One areas in particular, but also those affected by other European grant regimes will have varying demands on their resources as a result of the need to match fund grant applications. This should be recognised in the formula.
12. We believe that the balance between deprivation and rurality should be revisited to ensure that Councils serving large rural populations receive the necessary resources to meet the additional demands this makes on their services.
The Liberal Democrat group is concerned at the impact of the gearing effect on future Council tax bills. We believe that recommendation 21 of the Swansea University study should be implemented in full so that a grant mechanism can be devised to counter the wide variations between Authorities in their Council Tax bases and their SSAs. We believe that it is unreasonable that spending of 1% above SSA in Monmouthshire should lead to an additional £22.81 on their Band D Council tax bill but that a similar overspend in Merthyr Tydfil will see Band D Council Tax bills rise by £41.57. This should be tackled by some form of tapering grant so to allow Councils local discretion without penalising council tax-payers unreasonably.
We also believe that no Council should lose out as a result of the introduction of the new formula. However, we are opposed to a damping scheme as this will only delay the pain without tackling the fundamental under-funding of local Government. Accordingly, we believe that there should be a one-off and permanent general uprating of the Local Government Revenue Support Grant Settlement to cancel out the losses to Councils as a result of the new formula and the loss of damping grant.
Peter Black AM
6 September 2000