Councils warn new funding formula will ‘devastate' children's services
They say the new approach, which is part of adjustments to the process of setting authorities' overall annual core funding, risks 'dramatically underestimating levels of need' across the country.
The Government is consulting on plans to alter the way the distribution of core council funding is set from 2026/27.
A key element of this is the use of a new formula which determines funding levels for individual councils' children's services using various measures, with the aim of distributing funding based on relative needs.
The children's services formula alone would cover about a quarter of the overall £30 billion that would be distributed using the new overall approach.
Modelling of the impact of the changes by London Councils, which represents 32 boroughs and the City of London, found £1.5 billion would be redistributed away from the capital's boroughs over three years if the children's services formula was the only change.
The analysis showed that if all planned financial protections and overall changes to formulae, some of which benefit London authorities, come into effect, councils in the capital would lose £700 million over the period.
Research by the National Children's Bureau found the new 'unique' formula for children's services 'has questionable overall robustness and accuracy' because of a lack of testing and metrics that 'are not correlated with need'.
The study concluded that the proposed data sources to be used do not include housing costs, which are particularly high in London, resulting in funding allocations being skewed.
It also said that the proposed measure of child health is 'subjective' and a more 'objective' measure, such as figures on special educational needs and disability, would capture a broader range of need.
The proposed metrics relating to housing occupation and parents' level of education were also identified as problematic measures.
The new formula is also said to assume London's demand for children's services has decreased by nearly 40%, despite a collective overspend of budgets by more than £150 million in each of the previous two years.
London boroughs claimed the children's formula has been developed 'behind closed doors' with insufficient scrutiny or testing.
Claire Holland, the newly elected chairwoman of London Councils and Labour leader of Lambeth Council, said: 'We welcome the Government's intention to reform council funding since this is long overdue, and it is critical that funding is distributed fairly and efficiently on the basis of need.
'However, it's clear there are serious issues with the proposed children's services formula, which risks dramatically underestimating levels of need in London and other parts of the country. This would have a devastating impact on our ability to deliver vital local services, particularly for our most vulnerable children and young people.
'A more accurate approach to assessing local levels of need is in everyone's interests. It will help create a funding system that is robust, provides councils with the resources they need and, following 14 years of structural underfunding, restores long-term financial stability to boroughs and the wider local government sector.
'The consultation is an essential opportunity to re-examine the formula, and we are keen to work with the Government to develop a model that is accurate and robust.'
James Shutkever, social care programme lead at the National Children's Bureau, added: 'At a time of increased pressure on children's services departments across the country the relative needs formula is a crucial tool for fair distribution of funding to ensure that children, young people and their families get the support that they need and deserve.
'However, our research raises significant concerns about the robustness of the Government's proposed methodology for the funding formula.
'We urge the Government to consider the recommendations set out in the report and refine its proposals. This will help to ensure that the formula lives up to its name and is based on need.'
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