Broken funding systems for public services that are not set up to tackle geographic inequalities are putting the “levelling up” agenda at risk, a leading economic think tank has warned.
Reforming these systems to boost funding for poorer areas appears unlikely over the coming years as the Government cuts public spending to balance the books, the Institute for Fiscal Studies (IFS) said in a new report.
Chancellor Jeremy Hunt has said departments must find savings from their budgets as he seeks to plug a multi-billion pound financial black hole.
Current funding systems for the main services outside the NHS are not set up to tackle inequalities— David Phillips, IFS report author
Progress on levelling up is therefore likely to be “very limited, at best”, according to the IFS.
The report found that school funding has been becoming less targeted at the most deprived pupils and is still overly concentrated in London.
The funding allocation formula means schools in more affluent areas have seen a 3-4% real-terms increase in funding per pupil, while those in poorer areas have seen little change.
Public health funding allocation bears little relation to estimates of spending needs, with some deprived councils receiving up to one third less than they were predicted to need.
Every council has seen the same percentage change in funding each year since 2015, despite differences in population growth, and there is no plan to address these gaps, the IFS said.
Similarly, the grant funding police forces receive has changed by the same percentage irrespective of changes in population or wider needs in the last eight years.
Due to problems with local government funding, the poorest 10th of councils’ share of spending on adults’ and children’s social care is around 15% and 10% below their share of needs, according to the report.
IFS associate director David Phillips said: “Tackling persistent geographic inequalities in health, wealth and life chances across the country will require more than changes to public spending. But how spending is allocated between places does clearly matter, especially for those typically more disadvantaged people most reliant on public services.
“Current funding systems for the main services outside the NHS are not set up to tackle inequalities. School funding has been becoming less targeted at the most deprived pupils and is still overly concentrated in London. Council, police and public health funding bear less and less relation to estimates of spending needs each year, with no way to account for how changes in local circumstances can affect spending needs.
“Addressing these issues would be a vital part of a truly ambitious ‘Levelling Up’ agenda – but reform has been seemingly kicked into the long grass.”
