Financial risk from High Needs Deficits
Service quality risks
In the engagement carried out for this programme, service directors hypothesised that people-based services delivered by larger local authorities were typically more highly rated by regulators. Therefore disaggregation posed a risk that service quality would be negatively impacted by disaggregation. Regression analysis for this programme controlling for demographic and socioeconomic factors revealed that larger authorities are more likely to receive "Good" or "Outstanding" ratings from Ofsted for children's services. Service directors engaged in this work argued that the relationship appears linked to larger authorities' capacity for practice development, quality assurance, and attracting experienced leadership.
High Needs Block (HNB) deficits held by local authorities, as a result of overspends and the statutory override, are arguably the single biggest financial risk facing county councils. How these deficits may be distributed as a result of LGR is a fundamental question for the financial sustainability of the newly formed authorities, particularly where disaggregation takes place. Analysis for this programme shows a greater level of variation in the level of risk as the number of unitary authorities increases (and the scale of these reduces). This suggests significant inequality in financial risk could be created, which may demand disproportionate and unevenly distributed savings to be delivered in the future.
Regression analysis of Ofsted ratings
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