This paper provides an update on recent developments concerning local government finance.

The Department for Communities and Local Government (CLG) has published a work programme for the review of grant distribution to inform the 2011/12 to 2013/14 local government finance settlements. Included is a full review of the Area Cost Adjustment (ACA), announced by the Minister for Local Government John Healey MP in December last year.

The Settlement Working Group (SWG) met to discuss the review on 3 June 2008. The agenda included a discussion of the CLG's work programme, the review of the ACA, potential changes to the highway maintenance formula, the impact of local government reorganisation on grant, and a review of the fire formula.

London Councils' has identified the following four key work areas for particular focus:

Area Cost Adjustment - This is a major issue for London as there are concerns that any changes to the current ACA methodology would disadvantage London. With this in mind, London Councils proposes to:

Personal Social Services - As reported last month, the Government has no plans to improve the Younger Adults' Personal Social Services (PSS) formulae despite evidence to suggest that this funding approach disproportionately under funds high needs urban areas. London Councils campaign to review the PSS formula, Speaking up for vulnerable Londoners, featured on the Politics Show in June, when the Chairman, Cllr Merrick Cockell, took part in a studio debate.

In May Cllr Cockell wrote to the Parliamentary Under-Secretary of State for Health, Ivan Lewis, MP, requesting a meeting to discuss this issue. At the time of writing London Councils has not received a response.

London Councils officers have also expressed concern to Department of Health (DH) officials that the Younger Adults' PSS formula was not included in the work programme. The DH has now confirmed that an academic peer was undertaken for this formula. London Councils is liaising with the DH to obtain a copy of the peer review report.

London Councils proposes to continue to campaign for a fairer funding formula for Younger Adults PSS and to undertake further analytical work to build a more robust evidence base, assuming the DH provides access to sufficient data to enable this additional work to be undertaken.

Population - London Councils welcomed CLG's commitment to explore the use of population mobility indicators in the Environmental, Protective and Cultural Services (EPCS) formula. London Councils will continue to pursue its wider work programme on population, monitoring and critiquing ONS population statistics and methodologies and their impact on local government finance.

Four Block Model - London Councils will work with the Local Government Association and the County Councils Network to look at ways to increase transparency and reduce volatility caused by the four block model.

The proposed areas for particular focus are being discussed with London Treasurers to assess how best to ensure an effective London input into the debate on grant formulae. Further reports will be brought to the Committee on the progress of these discussions. Leaders are recommended to agree that the Local Government Finance work programme should include the four key themes identified above.

The publication follows figures published in March this year as part of an ONS consultation with boroughs on the internal and international migration assumptions used in the first year of the projections. Details of the consultation 2006-based SNPP figures were given in a report to Leaders' Committee on 1 April.

The latest figures are similar to those published for consultation, though the long-term trend is slightly higher than in those published in March. Between 2006 and 2031 London's average growth rate is 0.66%, compared 0.65% at consultation, though this is still lower than the English average of 0.70%. Details of borough level changes can be found in Appendix 1.

As per the consultation figures, London's 2006-based population projections are higher than earlier projections, the last being the 2004-based projections. The differences are mainly due to revised estimates of natural population growth.

It is unlikely that the 2006-based SNPP will be used in the distribution of formula grant to local authorities as a further set of projections, 2008-based, is expected to be published prior to the announcement of the next three year settlement in 2010.

On 11 June 2008 the Department of Communities and Local Government (CLG) published a report `Managing the impacts of migration: a cross government approach'. The report outlines how central government, working with local government, will deal with the impact of migration. The document sets out what the government is already doing to manage the local impacts of migration, what its new proposal are, and the role of local government and other partners.

The paper outlines a number of policy initiatives and funding promises from central government to help support local authorities. The key initiatives are:

An update on the progress made on the commitments in the report has been promised for early 2009.

Also on the 11 June, CLG published a review of the current strategies, policies and processes in place to support the integration of new migrants. The review also assessed whether there was a need for an Integration Agency to support new migrants, as recommended by the Commission for Integration and Cohesion.

The review concluded that there was no rationale for developing an Integration Agency, as the functions of such an agency could be provided within existing structures and therefore the additional cost required could not be justified. It went on to say the Communities and Local Government Migration Network should take the lead in co-ordinating work across government around the impact of migrants on local communities and outlined the work areas it should concentrate on, including;

The House of Lords Select Committee on Economic Affairs reported on its inquiry into The Economic Impact of Immigration in April 2008 and details of its findings were presented to Leaders Committee in May. The government responded formally to the report on 11 June.

The government confirmed that migration statistics required improvement and pointed to the introduction of the e-border programme, mandatory ID cards for foreign nationals and the improving migration and population statistics (IMPS) work programme, as examples of current government work to address the issues raised by the select committee. The response also referred to the CLG report `Managing the impacts of migration' to show how central government would work with local government in dealing with migration issues.

The third meeting of the Schools Formula Review Group was held on 9^th June 2008. This meeting considered the following issues:

The Department for Children Schools and Families (DCSF) intends to undertake further work on ALF as part of its research programme. At the time of writing, the department has not produced a specification for this research.

DCSF analysis using Contextualised Valued Added (CVA) data indicated a `compelling' link between pupil mobility and poor attainment. However, the department felt that pupil mobility overlapped with other measures of deprivation, particularly free school meals and therefore felt that any new funding approach should not include this factor, suggesting that mobility would no longer be part of the review. London Councils pointed out it was unnecessary for a judgement to be made in this instance as the correlations between different factors could be tested statistically. On that basis, the Schools Funding Group agreed to keep pupil mobility under consideration until further evidence about its impact could be assessed.

On 22 April, London Councils and the Local Government Association (LGA) attended a joint meeting regarding asylum funding with Liam Byrne MP, Minister for Borders and Immigration and Kevin Brennan MP, Parliamentary Under Secretary of State for Children, Young People and Families. The two issues raised were:

It was agreed that officials and local government officers would meet to go through the detail of the claims and shortfalls before making a recommendation to a joint meeting of Members and Ministers. The meeting must take place before the summer recess.

There has been progress with the Home Office and further resources have been found to meet some of the shortfall on Special Circumstances grant. But offers from the DCSF have so far been inadequate. A date is now being sought for the meeting between Members and Ministers.

The Department for Communities and Local Government recently published the latest council tax collection figures for England. Following on from recent trends, London has continued to make significant improvements in its collection rates. Between 2006/07 and 2007/08 London collection rates rose by 0.5% from 95.1% to 95.6%, giving London the largest percentage increase in collection among all classes of authority. A number of London councils increased collection rates by more than 1% between years. Hackney recorded increased rates of 1.9%, 1.4% in Islington and 1.4% in Brent.

Leaders are recommended to agree the four key Revenue Grant Distribution work themes identified in the first section of this report and invited to consider any further activities.

There are equalities implications arising from:

There are no uncosted financial implications for London Councils arising from this report.