Fair funding review modelling tools

Earlier in 2018, the LGA commissioned TRL Insight and LG Futures to deliver a number of models to focus on the main parts of Government’s Fair Funding Review of local authority relative funding needs and resources.


We hope these models will provide member authorities with a set of tools to evaluate the impact of future proposals arising from the fair funding review, or to enable them to consider proposals of their own.  We will also use these tools to help inform policy discussions.

None of the models, or the results they produce, are intended to signal any policy direction by the LGA. This piece of work is also separate from our wider efforts around securing a sustainable quantum of funding for local government as a whole.

We remain clear that in order for the fair funding review to lead to a fair and sustainable result it needs to be accompanied by additional funding for local government as a whole. In our latest analysis launched at the 2018 LGA conference, we estimated that local services face a funding gap worth £7.8 billion by 2025 if no action is taken at the 2019 Spending Review.

PLEASE NOTE: These Excel models contain macros which have to be enabled for the model to be functional and for that reason they are hosted externally on Google Drive. Depending on the security settings of your IT systems, and on the version of Excel you use, you may encounter issues with activating the model. In which case we would ask you to try the following procedure:

Save the file locally, close Excel, reopen Excel and open the file. If this does not work, please get in touch with us through businessrates@local.gov.uk and we will arrange for a physical attachment to be sent to you (please note, the files are quite large).
 

Open the model

This model, commissioned by the LGA and delivered by TRL Insight, allows for the creation of up to 13 formulae to make up a combined relative needs assessment. The user can specify the amount of funding being distributed on the basis of each formula.  Each of the formulae is built to consist of up to 12 cost drivers, and they can be weighted individually. 

The model contains over 100 built-in cost drivers that the user can choose from. They are grouped (but not limited to) specific council service areas to make the process of building formulae quicker. Users of the model can also input up to 14 custom cost drivers, provided they have the data for each individual local authority to which they would apply. 

Once a desired number of formulae, indicators and weightings is in place, the model provides the calculation of what this combination would mean in terms of funding for individual member local authorities, regional totals and totals based on local authority type. Finally, the model compares the relative needs assessment shares to the shares that were in place when they were last recalculated for 2013/14 to provide an indication of whether a given authority is better or worse off under the new assessment.  

Our model only allows the formulae to be constructed by multiplying an indicator by a weight. In reality, a relative needs formula can take a different shape although more complex approaches are less likely. 

While the relative needs assessment and relative council tax deduction models are manipulated in isolation, their results could also be looked at in combination. The funding baseline will be the result of the council tax (resources) baseline being subtracted from the needs baseline. Being ‘better off’ on the needs baseline does not guarantee a higher funding baseline, and the same applies to the council tax adjustment. 

Open the model

The relative council tax adjustment model calculates the council tax deduction which is part of the relative resource assessment. The deduction is subtracted from the assessed relative needs to calculate funding baselines for individual local authorities.

For the model to work, the user has to specify the total amount of the deduction at a national level, choose any adjustments to the council taxbase, and the council tax level used.

The model calculates the council tax deduction assigned to each individual member local authority, as well as regional and type-based totals. The shares of the deduction are compared with the shares of the deduction in use when they were last recalculated for 2013/14 to provide an indication of whether a given authority is better or worse off under the new assessment. 

The council taxbase in the council tax deduction model is net of all council tax discounts. Data exists in the public domain to enable adjustments to not take specific different discounts into account. The LGA model does not allow for this to reduce the complexity of the model for the user and because the vast majority of discounts are mandatory. 

While each of these models are manipulated in isolation, their results could also be looked at in combination. The funding baseline will be the result of the council tax (resources) baseline being subtracted from the needs baseline. Being ‘better off’ on the council tax adjustment does not guarantee a higher funding baseline, and the same applies to the relative needs baseline. 

Open the model

Model guidance

This transition options model, commissioned by the LGA and delivered by LG Futures, allows the user to explore the implications of a number of different approaches to moving from the current pattern of funding distribution to a different one (based on the outcome of the Fair Funding Review).

It allows users to compare and contrast the implications of setting time limits, floor protections, or a combination of both on individual member authorities, and England as a whole. 

At time of publication (December 2018), there is insufficient information on the outcome of the Fair Funding Review to model transition to the new funding baseline. As a result, the model is currently based on randomised scenarios, with an option to also look at the distances from target allocations that were still present when funding baselines were locked in as part of the move to 50 per cent business rates retention in April 2013. None of the randomised scenarios, or the pre-2013 scenario, are a forecast of the outcome of the Fair Funding Review nor do they, or the model, constitute LGA policy.

We will use the model to explore the implications, advantages and disadvantages of different approaches to transition using this model and hope it will also be useful to our member authorities when responding to consultations and making representations to the Government

Bright Futures

Business Rates Retention and Fair Funding Review consultation events
The LGA has organised a series of regional consultation events to enable councils to hear from officials on the consultations, to ask questions and to make contributions.

Regional events will be taking place in BirminghamLeedsLondon, Taunton and Bury St Edmunds.