Local government receives a finance settlement from the Ministry of Housing, Communities & Local Government (MHCLG) department, which allocates the cash individually: ‘At present, 15 relative need formulas and several tailored distributions for services previously supported by specific grants are used to determine annual funding allocations for each local authority across England. These formulas involve over 120 indicators of “need”, reflecting factors previously identified as driving the costs of service delivery.’

This is the MHCLG putting the situation in its simplest terms. As a result of the increasing devolution of cash to local authorities, particularly from business rates, which saw a 50% retention rate from 2013-14, the Government has launched a consultation on reforming the system under what has been called the ‘Fair Funding Review’.

The plan would be to distribute cash under a basic ‘funding formula designed primarily on a per capita basis - except for London Boroughs, who will have an adjustment to account for some services being provided by the Greater London Authority - with an Area Cost Adjustment applied. In this the government is moving away from adding in deprivation as a factor in grant funding.

Highways is one of the more technical areas that the Government agreed required a specific approach. Highways maintenance is one area that had traditionally received revenue funding for highways under the purview of the local government department.

Ministers had suggested that road length, traffic flow, and forecast snow days/predicted grit days would be used for this specific distribution formula but then concluded against the inclusion of winter service.

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