This financial year one-fifth of all government spending was distributed to local public bodies through three grants – primary care trust allocations, the dedicated schools grant and the local government formula grant.
Combined, the grants are worth £152bn and pay for everything from local health and education provision to Sure Start children’s centres and youth services.
But according to a report by the Committee of Public Accounts, the current funding system is complex, difficult to understand and leads to "inequitable" allocations.
The report warned that nearly 20 per cent of local authorities received formula grants that were more than 10 per cent higher or lower than they needed this year.
This is because the Department for Communities and Local Government’s approach to calculating the formula grant attempts to preserve "stable" funding, as opposed to giving out cash to meet "actual needs".
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