4 September 2007

The Liberal Democrats are doing the grievance thing again.

They are complaining that Cornwall does not get a fair share of central government money (the “formula grant”) for local government services in Cornwall, that Cornwall’s formula grant is less than the national average, that Islington gets more funding, and that Cornwall loses money by means of “damping.” I think Islington is mentioned because it can at a push be presented as Tony Blair territory.

First, the formula grant, simply.

This is basically what the money given by central government to local government authorities is called. It is made up of non-domestic rates (business rates) collected locally, pooled centrally, and then redistributed; the revenue support grant for such things as pay and services; and, now, a dedicated schools grant. The various amounts paid to each authority are worked out by formulas which aim to reflect the particular circumstances of the authorities taking account of levels of deprivation, number of pupils, the composition of the population, and so on. See here for details about the working out of the Cornwall grant. Housing and in effect police services are paid for by other funds. And on top of this central government money the local authority raises more money by levying a council tax.

Second, how much are we talking about?

For 2007/08 Cornwall county council gets a formula grant of £127.970 million. The district councils in Cornwall also get formula grants.

What is damping?

That formula grant of £127.970 million is after an amount is taken away from Cornwall county council’s central government funding for “damping.” This is a mechanism for redistributing money among authorities to ensure each one gets a minimum grant increase, in effect and intention a mechanism for minimising changes in grants received. This damping device strikes me as a civilised response, protecting people from a sudden and large loss of central government money. Cornwall gave up £6.7 million for damping in 2007/08. I should have thought Liberal Democrats in Cornwall would approve of the mechanism but apparently not.

Does Cornwall get less than the national average? I am unsure what this national average means since the grant to local authorities reflects their different sizes of populations, the different make-ups of their populations, and the different needs of their populations. Average is a problematic concept with so much reasonable variation. For the one aspect where average is meaningful the 2007/08 Budget Book published by Cornwall county council says on page 16 that the percentage increase in the formula grant for Cornwall for 2007/08 is “above the English average” increase: see here.

Does Islington get more than Cornwall for the formula grant? Oh yes, for 2007/08 it receives £146.776 million. Is this unfair? Well, I discussed the unfairness issue when the Cornwall Libdems complained about Islington getting a larger dedicated schools grant than Cornwall. Islington has a larger proportion of pupils on free school dinners and more measured deprivation. Again, I should have thought Liberal Democrats supported equalising help for the worst off, but again apparently not.

The Liberal Democrats in Cornwall are sounding like a party that is not in favour of redistributing wealth. Before David Cameron came along we usually called such a party Conservative.

Does Cornwall get a fair share of the money? Look at the way the grants are worked out and decide: see here. I believe it largely does; Cornwall is not bled dry by the rest of England.

For example, in the redistribution of the business rates (part of the formula grant), Cornwall receives back £102 million more than is collected from the county. This gain dwarfs the damping loss. Islington, by the way, gets back £15 million less than it collects.

Have you read about the £102 million gain for Cornwall on Liberal Democrat or nationalist websites? There’s really quite a lot of positive news for Cornwall that doesn’t get a mention on them, isn’t there?