Review launched into how councils are funded in Wales

Mark Mansfield

The system used to divide billions of pounds of funding between Wales’ councils is to be reviewed amid concerns it does not properly reflect the different costs of providing local services.

The Welsh Government has commissioned the Wales Centre for Public Policy (WCPP) to examine the local government funding formula and consider potential reforms.

The work will look at factors including rurality, deprivation, demographic change and the additional costs of delivering services across sparsely populated areas.

However, ministers have warned that the scale and complexity of the review means any changes could not take effect before the 2028-29 local government settlement.

Work is already under way to update the evidence used in the formula, initially focusing on education and personal social services, which together account for almost three-quarters of the funding distribution.

Researchers will also examine different methods used to distribute local government funding elsewhere in the UK and internationally.

Among the options being considered are new measures of sparsity and population dispersion, including the use of travel-time data to better calculate the costs faced by rural and remote areas.

The review will also consider new school and pupil-based measures, the impact of an ageing population on demand for social services and approaches used in Scotland to calculate need.

Minister for Local Government, Housing and Planning Siân Gwenllian said: “Local authorities across Wales are on the front line of delivering the services people rely on every day, and it’s right that the way we fund them is based on evidence and keeps pace with how our communities are changing.

“That’s why I’ve been clear that this review must be done in partnership with local government, and I’m pleased colleagues on the Finance Sub-Group have supported the work so far.

“This is about making sure that funding reflects the real pressures faced by different parts of Wales, whether that’s a sparsely populated rural authority or an area with a growing and ageing population.”

Formula

The review fulfils a commitment made by the new Welsh Government for its first 100 days.

The proposed programme was discussed with council leaders and the Welsh Local Government Association through the local government Finance Sub-Group on July 8.

According to the Welsh Government, the group supported the proposed direction of the review.

The existing principles of equity, stability, clarity and relevance will continue to underpin the way potential changes are considered.

Dr Helen Tilley, director of policy and practice (Welsh Government) at the Wales Centre for Public Policy, said: “We are delighted to have been invited to provide evidence for this critically important review, particularly by considering how the experiences of other countries may be relevant to Wales.

“The thorough nature of the review is commensurate with the significant impact that the revised formula will have on the day-to-day lives of people across Wales, both directly through the provision of public services and more broadly through its influence on labour market participation and, in turn, the Welsh economy.”

Any recommendations resulting in changes to the formula would have implications for how funding is divided between Wales’ 22 local authorities, with the earliest possible implementation in the 2028-29 financial year.

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