Amyas Morse, head of the National Audit Office, said
today:
"One fifth of all government spending is allocated on
the basis of these three funding arrangements. The current reviews
are a good opportunity to ensure formulae are designed to reflect
clearly prioritised objectives, to promote transparency and
accountability."
The complexity of the formulae used by
government departments to provide funding to local public bodies is
partly down to the nature of the services being funded, and partly
to the fact that the formulae attempt to achieve multiple
objectives, according to a report published today by the National
Audit Office. The different approaches to formula funding have
evolved over time, but key choices in the design and operation of
the formulae remain open to question.
Of the three funding arrangements on which it
reports, the NAO concludes that the Department for Education and
the Department for Communities and Local Government have not set
out clearly, or explicitly prioritised, their multiple objectives
for the design and distribution of Dedicated Schools Grant and
Formula Grant. This prevents analysis of the extent to which the
formulae represent the best way to satisfy objectives.
Each of the formulae is grounded in an
assessment of relative needs, but other aspects of their design
differ. For instance, Primary Care Trust allocations include a
component to address health inequalities. The Dedicated Schools
Grant prioritises stability of funding, by basing allocations on
those of previous years. This approach is not responsive to changes
in pupil characteristics. The Department recognises this in its
current consultation on school funding. Meanwhile, the Department
for Communities and Local Government’s Formula Grant has become
increasingly complex, hindering transparency.
All of the funding arrangements examined by
the NAO include provisions to ensure funding stability. Without
stability, the budgets of funded organisations would vary more
greatly from year to year, making financial planning and stable
service provision more problematic. But adjusting formulae to
ensure stability has, in practice, led to some local bodies being
funded for extended periods significantly above or below
needs-assessed levels.
Population data are the biggest determinants of funding, and
Departments use the most current data available, though there are
significant differences between population data sets within some
geographical areas. Inputs to the formula to reflect additional
needs are not as influential over allocations, but because many
inputs are census-based, a quarter of those used in Formula Grant
and ten per cent of those used for Primary Care Trust allocations,
are based on data sources that are now ten or more years old.
Publication details:
HC: 1290, 2010-2012
ISBN: 9780102969924