Census: impacts on local funding and deprivation

The first wave of Census data came out this week, and already there are some big stories for local areas in terms of funding and deprivation levels emerging from the data.

We’ve put together a briefing of the basic Census findings here, and there are some nice visuals from the Office for National Statistics (here and here).

1. IMPACTS ON LOCAL AREA FUNDING
The number of people in the local area is a major part of the funding formulae used to allocate cash from central to local areas. These are usually updated every year with the mid year estimates, but analysis of the first release of Census 2011 data suggests that in many local authority areas those mid year estimates are pretty far out:

• The Census 2011 population in Newham is 28% higher than the 2010 mid year estimates, with a further five London boroughs (Brent, Waltham Forest, Haringey, Hackney and Greenwich) seeing an increase of more than 10% in the Census. This is likely to have a major impact on funding levels in these areas, and further fuel the argument that many areas have been undercounted (and so unfairly under-resourced) by the previous Census and mid year estimates.
• At the other end of the scale, eight local authorities (four of which are in central London) have Census 2011 populations which are more than 6% lower than the mid year estimates – these areas are likely to face significant funding reductions over and above the current round of public sector cuts.
• As an example, search the Local Government Funding Formula for ‘census’ or ‘projected population’ (these are underpinned by the Census and mid year estimates, so we would  expect them to be also be updated) – the majority of grant blocks use data from either or both of the 2001 Census and projected population datasets.

In many areas, the impacts on services already under severe  budget pressure will be significant. Always a thorny area, local government financing faces another tricky issue to explore and resolve from the new Census data.

2. DEPRIVATION LEVELS WILL NEED TO BE REVISED
There is also a major story around deprivation levels. Deprived local areas are identified using indicators such as the Index of Multiple Deprivation (IMD)  – we’ve written here and here about the IMD 2010 importance and results – or the proportion of people receiving benefits from DWP.

The location of the most deprived areas or local authorities is of much more than academic interest, with resources such as extra funding, tax breaks or local programmes often targeted at deprived areas. For example, we have recently worked with Welsh local authorities looking at the impact of deprivation levels on funding – and shown that measuring deprivation in different ways can have a multi-million pound impact on funding.

What many deprivation indicators need is an accurate population figure to use as a denominator. For example, the income and employment domains of the IMD use the number of people on certain benefits and tax credits, as a percentage of the local population size. Changes to the estimate of the population size in an area therefore have a direct effect on the estimated deprivation level in that area.

In other words, deprivation levels in the local authorities of Newham, Brent, Waltham Forest, Haringey, Hackney and Greenwich (each of which have much bigger Census 2011 population size than in the mid year estimates 2010) are likely to be very heavily overestimated using mid year estimates, and really should be revised using the newer census population data.

When the small area Census data starts appearing in October, we’ll see how this story translates to neighbourhoods. My guess is that there could be some big revisions to our understanding of the geographical patterns and trends in deprived areas. Yet another reason why the Census is such a critical dataset.

• Tom Smith is director and Stefan Noble is a researcher at Oxford Consultants for Social Inclusion.