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COVID-19 funding for councils could be based on an outdated model, says IFS

A new briefing from the Institute of Fiscal Studies (IFS) claims that the formula upon which the Government is providing £1.6 billion to English councils is “outdated” and may not reflect spending pressures.

The extra funding is being provided in response to the coronavirus pandemic but is being allocated according to assessments of spending needs from 2013-14.

The vast majority of the funding will go to adult social care, one of the services likely to be most affected by the pandemic.

The IFS briefing looks at how much different councils are set to receive and finds big differences in allocations for different parts of the country, substantial differences in how demographics and spending have changed over the seven year since assessments were initially calculated and very little relationship between funding allocations and currently confirmed COVID-19 cases.

The use of out-of-date and overly-general spending needs assessments could, the IFS says, mean that funding may not end up where it is ultimately needed most.

The amount allocated per resident ranges from £15 in Wokingham to £45 in Knowsley.

In general, it is lowest in the Home Counties, especially to the west of London, which has been badly affected by COVID-19 and highest in parts of Merseyside, Teesside, Tyneside and inner London.

Funding for “deprived” areas is higher not only in pounds per resident terms but also when measured as a percentage of spending on adult social care.

The populations of different areas have also changed significantly over the last seven years, which will affect spending needs.

The coronavirus could also impact different councils in very different ways that have little to do with their general spending needs.

David Phillips, an associate director at the Institute for Fiscal Studies and the author of the briefing, said: “Accurately predicting in advance how much the coronavirus pandemic will affect councils in different parts of the country and providing funding accordingly is a near-impossible task.

“Given it wanted to provide additional funding quickly, the Government has therefore had to make use of the rough proxies already available to it.

“But there are other approaches it could have taken, and indeed could still take if further funding is needed.

“Rather than try to allocate all of the funding in advance, it could loosen the rules to allow councils to borrow to fund day-to-day spending linked to the coronavirus pandemic, allowing them to respond rapidly in a manner they see fit.

“The Government could then reimburse councils at a later date once it has a better idea of what the impact of the coronavirus has been in different parts of the country and is able to apply proper financial safeguards.”