14.10.2013

Fairer rural funding remains thorny issue

PRESS RELEASE
For immediate release

14 October 2013

Debate in Parliament shows that funding for rural authorities is a thorny issue that has not gone away.

On Thursday (10 October 2013) a cross-party group of MPs stood up in the House of Commons to press the case for a fairer funding settlement for local authorities in rural areas. In a backbench business debate, secured by Conservative MP for Tiverton, Neil Parish, and the former defence minister and Liberal Democrat MP for North Devon, Sir Nick Harvey, a range of MPs from rural constituencies across the country passionately argued for a fair deal for local authorities in rural areas that have historically been underfunded compared to their urban counterparts.

During the debate, which lasted for almost four hours and shows that the issue of rural funding has not gone away, rural MPs made the following points:

* Urban councils are still receiving 50% more government grant per head than local authorities in rural areas despite the fact that residents in rural authorities pay on average 15% more in council tax, and many public services are more expensive to deliver in sparse populated rural areas

* As a result of the local government funding settlement for 2014-15 and 2015-16 being effectively frozen, the current disparity in funding between urban and rural local authorities will be entrenched, "locking in" past inequalities

* Neil Parish MP, a member of the Rural Fair Share group, called on the Government to "reduce the urban funding advantage over rural areas incrementally, year on year, to no more than 40% by 2020"

Neil Parish MP said: "The Backbench debate on local government funding showed the strength of feeling on all sides of the House and I would like to thank the many Members who spoke in the debate for their support. Although I welcome the Local Government Minister's remarks we are only asking for one tenth of 1% of the total budget to be shifted towards rural authorities each year to put an end to the current situation where urban councils get 50 percent more per head than rural ones."

Sir Nick Harvey MP said: "At a time when local governments are being squeezed to unprecedented levels, the Government is giving no thought to the current funding settlement, which 'locks in' unfairness until 2020. Unless urgent action is taken to get rid of the disparity, constituencies like mine in North Devon are going to end up with far fewer social workers, buses and care services for vulnerable children. It is unacceptable. Rural-dwellers are receiving only two-thirds as much local government funding as people in cities. Local people will – rightly - no longer put up with this unfairness while watching their public services erode".

Graham Stuart MP said: "Many MP colleagues from across the country have come together in the Rural Fair Share campaign to demand change. Last week's debate allowed one after another to press the Government to hear our call. I set up the Rural Fair Share campaign because the rural voice has been too little heard and too easily ignored. Historic injustices have been reinforced rather than removed. This must change. Our demands are modest. We want to see the Rural Penalty which sees 50% more per head going to urban councils narrowed to no more than 40% by 2020. If the Government won't unpick the funding model then we need the £8.5 million rural efficiency grant we secured last year to be increased to at least £30 million. This is just over 0.1% of the £24bn settlement and just over 0.2% if we only consider the £12bn of Revenue Support Grant. This issue won't go away and dozens of my colleagues on the government benches are equally determined to ensure a local government settlement which is fair to all – including their long neglected rural constituents."

Councillor Roger Begy OBE, Chairman of SPARSE-Rural and Leader of Rutland County Council said: "This debate follows the meeting of the Rural Fair Share campaign earlier in the year. It clearly shows that unless they address the problem and deliver to rural Councils in cash terms the gains that the increases to the sparsity weighting adopted by the government in 2012 should have produced this issue of gross unfairness to rural communities is not going to go away for the Government. This is not just a question of pressure on libraries and access to services but just as importantly on small village schools and adult care services".

Background on funding issue from rural perspective

Funding from central government for local authorities has always been a contentious issue; as a result there is a complicated system of formulae that seeks to address the varying needs and inequalities that exist in different parts of the country.

Despite this recognition, rural authorities have historically been underfunded. In the early days of the previous Labour government most grant allocations were based on past spending choices so the more authorities spent and the less efficient they were, the more grant they received. Many rural authorities, who have had to be more financially prudent, still feel trapped by this. Whilst the Labour government broke this link for several services the situation still persists, if less directly.

In the run up to the 2010 General Election there were a number of attempts to increase the sparsity allowance in local government funding but these were ultimately unsuccessful. Since 2010 the debate has come back to the fore. In early 2012, SPARSE Rural, part of the Rural Services Network that represents the most rural areas, submitted research to the current Government which highlighted that urban authorities receive 50% more funding per head than rural ones and that rural authorities pay 15% more council tax per head. SPARSE began to campaign on the issue.

In summer 2012, a DCLG consultation proposes improved sparsity weightings in four settlement formulae for 2013/14 which looked promising for local authorities. However, when the proposed changes were implemented most of the gains were lost through damping. This, with other changes, meant that the rural penalty is little-changed at 50% per head of population.

In response to this a cross-party group of more than 45 MPs gathered in Parliament as part of the Rural Fair Share campaign to call on the government to reconsider. In February 2013 following pressure from SPARSE and the Rural Fair Share campaign Government agreed to provide a new special grant for rural areas. It was a one-off, however, and distributed just £8.5m to 95 authorities in amounts ranging from £649 to £857k.

Last week's debate highlights the depth and breadth of feeling amongst parliamentarians and shows that this is an issue that will not go away.

Notes to Editors

The Rural Fair Share Campaign brings together Members of Parliament and Peers, on a cross-party basis, along with organisations, community groups, and individuals concerned about the welfare of rural communities, in order to work towards fairer funding settlements that better reflect real needs. The Rural Fair Share Campaign supports impartial, objective, needs based policy which is equitable to all.

DCLG has consulted on provisional allocations to authorities covering 2014/15 and 2015/16. Rural issues were not even mentioned in the consultation, so the rural penalty is almost unchanged over those years.