Analysis by Liam Clegg and Graeme Davies shows that between 2008 and 2019, Westminster governments systematically favoured politically-aligned local authorities when it came to distributing government grants.
The UK is a highly centralised state, in which the Westminster government exercises significant influence over the sub-national level of government. “Power of the purse”, the ability to control flows of finance travelling to local authorities, represents an important component of this central government influence.
As we have recently argued, there is a problematic financial relationship between central government and English local authorities. Our analysis of the distribution of central government grants to local authorities shows that, across 2008-19, Westminster governments systematically favoured politically-aligned local authorities. An authority that was in political alignment with the Westminster government received, on average, an additional £3.94m each year. With an average grant flow of around £160m per year, aligned authorities were capturing around 2.5 percent of additional financing from this source.
By exploring overall grant flows, this finding extends scholarship that has focused on the politicisation of specific pots of funding, and on the politicisation of “formula funding”. Hanretty, for example, has shown us that Conservative-controlled authorities were significantly more likely to be selected for the Town Deals created in 2019 under the Conservative Westminster government. John and Ward have shown that under the Conservative Westminster governments from the mid-1980s, Conservative authorities received higher funding through the annual formula grant whose coefficient is calculated with reference to a set of socio-economic criteria. They also suggested that the formula grant is easier than other grants for Westminster governments to manipulate; a one-time formula tweak can ensure the desired redirection of funds well into the future, whereas other grants require ongoing intervention. What we show is that Westminster governments seem to be willing to put in these ongoing efforts.
Our findings have shown that political characteristics of council leadership impact on who gets what, raising important questions over the equity and fairness of this grant-based funding.
Beyond these extensions that confirm the existence of politicised funding in the UK, we also turn our attention to the electoral impact from this funding. We specifically analyse 680 local election events between 2008-19, to test whether increased grant funding in the year preceding an election was associated with stronger performance. We found that increased funding was associated with stronger performance for the local incumbent and the local incumbent’s popularity rose with their increased capacity for financial largesse. The magnitude of the effect is small however, such that the additional £3.94m enjoyed by a politically-aligned local authority would translate into an increased vote share of 0.016 per cent.
The observed electoral boost from politicised funding is relatively trivial. However, given the extreme financial stress felt by local authorities across the country, its impact on budgets is more meaningful. Since 2021, six local authorities have issued “Section 114” notices. These notices serve to freeze non-statutory spending by the authority, and are generally regarded as the local government equivalent of a bankruptcy order. Given endemic financial shortfalls, questions are being asked, increasingly vocally, about the sustainability of the local government funding model in the UK. Our study raises significant concerns about the delivery of Westminster-to-local grants. Reliance on these unpredictable grant flows makes it difficult for councils to plan operations effectively over medium-term horizons, and leads to the sinking of scarce resources into grant application processes. Our findings have shown that political characteristics of council leadership impact on who gets what, raising important questions over the equity and fairness of this grant-based funding.
Grant funding decisions need always to be insulated from political considerations, be they focused on intra-party management or inter-party competition.
Our database covers financing flows up until 2019, which represented the most recent available data when we undertook our analysis. The ongoing salience of this issue is shown by the concerns raised by The Good Law Project over the UK government’s Levelling Up Fund, in March 2021. The Levelling Up Fund was a flagship initiative introduced under the Boris Johnson-led Conservative government, through which local authorities can gain finances for projects aimed at catalysing local economic development. The Good Law Project shed light on an additional form of politicisation in these grants, with the Levelling Up Fund seemingly being used as a tool for Conservative parliamentary party internal management: “reports from backbench Tory MPs suggest that access to public funding for local communities hinges on whether or not they toe the Downing Street line”.
Grant funding decisions need always to be insulated from political considerations, be they focused on intra-party management or inter-party competition. Through our study, when identifying a systematic effect from political factors on Westminster-to-local authority grant flows, we stand beside calls for the highest levels of transparency and probity in these Westminster-to-local financing processes. An “easy win” in this regard would be ensuring that Whitehall review processes are more effectively insulated from Ministerial involvement, while more radical reform could involve transferring decision-making power from government departments to an independent reviewing authority. Improvements are needed to build trust in the system, and to ensure that resources are supporting those with the most pressing needs.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.
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