Real cuts avoided as election nears

6th December 1996 at 00:00
Tony Travers gives an authority-by-authority breakdown of the spending deal for local government.

School funding should be just about sufficient to avoid major political embarrassment for the Government in the weeks running up to the general election. Arguments continue to rage about whether the extra cash available to schools is an increase of 4.4 per cent (according to the Chancellor's Red Book) or a cut of 1 to 2 per cent (according to the gloomier local authorities). In reality, the Government has made sufficient extra money available to be certain there will be no political disaster early next year.

This is not to say schools are in for an easy year. Far from it. But the Department of the Environment, working closely with the Department for Education and Employment, has now learned how to calibrate revenue support grant (RSG) settlements to deliver on all of the Government's conflicting objectives. A perfect settlement in these terms is one where local government's spending increases at or slightly below the rate of inflation and where sensitive spending areas such as education are protected from real terms cuts.

The 1997-98 RSG settlement will, like its 1996-97 predecessor, achieve the Government's conflicting aims. The truth about the figures announced last week is that they will allow councils to increase their capped spending by 2. 3 per cent from their 1996-97 budgets. Within this overall figure, metropolitan districts will face a slightly lower increase - 1.8 per cent, London boroughs an above-average increase of 2.5 per cent and the shires a rise of 2.2 per cent.

Many authorities slightly underspend their budgets, so the actual rise in spending will be a little more than the new caps imply. At the local authority level, the permitted year-on-year budget increases range from a possible rise of 16.2 per cent in the City of Westminster to zero in Hammersmith Fulham and 1 per cent in several authorities. The top and bottom 10 permitted spending increases are shown in the table above.

None of the non-metropolitan counties appears in these lists. The permitted increases for shire counties range from 2.8 per cent in Gloucestershire to 2 per cent in 12 counties. A number of newly-created unitary authorities, notably Bournemouth, have permitted spending increases that would put them in the top 10. But the difficulties of comparing their new capped spending figures with a hypothetical 1996-97 renders such comparisons meaningless.

But an authority's permitted spending figure is only part of the equation. Authorities have considerable freedom within this figure to set their budgets. In particular, the amount given to each service is up to each council. Changes in an authority's Standard Spending Assessment (the Government's calculation of what it needs to spend) are now seen by the Government as a key indicator of the relative priority to be given to education. SSAs for education in 1997-98 are 3.4 per cent higher - on a like-for-like basis - than the SSAs for 1996-97.

Like-for-like SSAs take account of the changes made to each authority's need assessment because of the introduction of nursery vouchers in all authorities from 1997. In order to make direct comparisons between the SSAs for the two years, the Department of the Environment has had to adjust 1996-97 SSAs to make them consistent with the new SSAs for 1997-98. It is these adjusted figures that appear in the large table below.

Within the overall education SSA increase of 3.4 per cent, the shire county increase is 3.4 per cent, metropolitan districts 3.3 per cent, London 4 per cent (4.6 per cent in outer and 2.9 per cent in inner) and 3 per cent in unitary authorities.

Authority-by-authority SSA figures show increases as large as 16.1 per cent (City of London), 7.1 per cent (Bromley), 6.9 per cent (Barking Dagenham), 6 per cent (Haringey) and 5.9 per cent (Newham). The lowest increases in education SSA have taken place in the Isles of Scilly (-6.3 per cent), Manchester (-0.4 per cent), Lambeth (-0.2 per cent), Redcar Cleveland (+0.8 per cent), Wirral (+1.2 per cent), Gateshead (+1.4 per cent) and Durham (+1.4 per cent).

As these outlying figures suggest, even in a year when inflation is relatively low and when changes to the SSA method were relatively few, there can be significant shifts in need assessment (and thus grant) from one year to the next. The implications for the education service are clear: the Government now expects local authorities to follow the general increase in overall education SSA: it would be hard for them also to argue that individual SSAs should not have some meaning in particular authorities' budget decisions.

Thus, other things being equal education in Bromley (permitted spending up 6 per cent; SSA up 7.1 per cent) looks likely to enjoy a more comfortable year than in, say, Manchester (spending up 1 per cent; SSA down 0.4 per cent). It would be hard to read the Government's message to Manchester from the reams of RSG documentation published last week as anything other than "cut real spending overall, but particularly chop education".

The RSG settlement included the usual collection of baroque changes to SSA calculations. The most important of these was the need to recalculate SSAs to take account of the nursery voucher reform. As in the pilot authorities in 1996-97, the DFEE has decided to reduce SSA in line with an authority's previous level of provision. In effect, this method penalises authorities that are currently providing relatively large numbers of under-fives places.

Changes were also made to parts of the education SSA for additional educational needs for "under-fives and others" (slightly reducing their weights), while the weighting given to free school meals has been slightly increased. Other, relatively tiny, changes affecting education SSAs were made to take account of boundary changes, to adjust the calculation of pupil data and to remove any allowance for the families of service personnel.

The 1997-98 RSG settlement continued the pattern of 1996-97. Some authorities and schools will feel they have had a relatively good year, while others will undoubtedly face real spending reductions. Each year brings these swings and roundabouts. No authority or school should rejoice at the suffering of others. Next year will almost certainly be your turn.

Tony Travers is a member of the Greater London Group at the London School of Economics


% increase in permitted spending for council services 1997-98

Top 10

Westminster 16.2

Bromley 6

Barking Dagenham 3.5

Brent 3.7

St Helens 3.4

Solihull 3.4

Sefton 3.3

Wirral 3.1

Tameside 3

Knowsley 2.9

Bottom 10

Hammersmith Fulham 0.0

Birmingham 1.0

Bristol 1.0

Gateshead 1.0

Greenwich 1.0

Islington 1.0

Kensington Chelsea 1.0

Manchester 1.0

Newcastle-upon-Tyne 1.0

North Lincolnshire 1.0

(Leicester, Redcar Cleveland, Sheffield, Southwark and Wolverhampton also face a 1 per cent budget increase in 1997-98)

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