The Welsh Government has announced a review of the formula used to distribute funding to local authorities across Wales. The Plaid Cymru administration has commissioned the Wales Centre for Public Policy (WCPP) to undertake the work, with the evidence base underpinning the formula already being updated.
The initial focus of the review is on education and personal social services, which together account for nearly three-quarters of the funding distribution. The assessment will consider additional costs arising from sparsity, rurality, deprivation and demographic change. WCPP will also review funding distribution methods used across the UK and internationally.
Review timeline and scope
According to the Welsh Government, given the scale and complexity of the review, the earliest point at which any changes could be implemented would be for the 2028-29 local government settlement. The review was discussed with local government in the finance sub-group last month, which includes leaders from local authorities and the Welsh Local Government Association.
The group was provided with an update on progress to date, the proposed scope of the review, and proposals for future work. The group supported the direction of travel.
Minister's response
Minister for Local Government, Housing and Planning, Siân Gwenllian, said: “Local authorities across Wales are on the front line of delivering the services people rely on every day, and it’s right that the way we fund them is based on evidence and keeps pace with how our communities are changing.”
“That’s why I’ve been clear that this review must be done in partnership with local government, and I’m pleased colleagues on the Finance Sub-Group have supported the work so far,” she added. “This is about making sure that funding reflects the real pressures faced by different parts of Wales, whether that’s a sparsely populated rural authority or an area with a growing and ageing population.”
Analytical improvements considered
A range of analytical improvements are being considered as part of the review. These include the development of new sparsity and dispersion measures, including those derived from travel-time data, to better capture the costs of delivering services in rural and remote areas.
Other improvements include the development of school-level and pupil-based indicators to better reflect need within the education system, engagement with counterparts in Scotland on approaches to updating needs-based distributions, and consideration of the implications of an ageing population for patterns of need and service demand, particularly within personal social services.
Dr Helen Tilley, director of policy and practice (Welsh Government) at the Wales Centre for Public Policy, said: “We are delighted to have been invited to provide evidence for this critically important review, particularly by considering how the experiences of other countries may be relevant to Wales.”
“The thorough nature of the review is commensurate with the significant impact that the revised formula will have on the day-to-day lives of people across Wales, both directly through the provision of public services and more broadly through its influence on labour market participation and, in turn, the Welsh economy,” she said.
