The English Standard Spending Assessment System: An Assessment of the Methodology

Abstract

A critical examination is undertaken of the methodology underlying the controversial Standard Spending Assessments (SSAs), which became a key feature of the local government finance system in England in 1990. Brief evaluations are made of statistical versus judgmental methods of estimating spending needs, and of the use of past outturn expenditures and client numbers to measure local authorities' need to spend on services. The impacts of SSAs on restructuring spending power between individual local authorities are estimated for personal social services and ‘all other services’. Such impacts are found to be substantial and to display some systematic patterns in terms of the characteristics of authorities most affected. More limited evidence for educational services partly supports these findings. Some of the identified changes in spending power appear to be attributable to statistical deficiencies in the existing SSA formulas and to the use of a limited range of need indicators. As central government is unlikely to replace SSAs in the short to medium term, there is a need to improve their methodology, but not to treat them as highly accurate predictions of spending needs.