Resource Allocation for English Local Government: A Critique of the Four-Block Model

Summary.
The paper examines the nature and structure of the ‘four-block’ model that is used by the UK’s Department for Communities and Local Government to distribute nearly £25 billion of formula grant. Introduced in April 2006, this approach to need and resource equalization was meant to provide a robust and equitable system for distributing the formula grant between the 456 ‘receiving authorities’ in England. In fact, the paper demonstrates that the four-block model is deeply flawed and generates an inequitable allocation of this major source of local authority revenue. The paper argues that the Department for Communities and Local Government needs to revisit its resource allocation methodology as a matter of urgency, but it also draws broader conclusions about the risks that are associated with the development of ever more complex methods of resource equalization.