The options facing Ministers as they reform the police funding formula for England and Wales
Authors: Harvey Redgrave, Chief Executive | Ellie Covell, Head of Strategy (Performance)
Wednesday 24 August 2022
The 43 police forces in England and Wales get almost all of their funding from two sources: the Home Office and local authorities. The amount of money each constabulary receives is calculated on the basis of a complex method, known as the police funding formula, which is currently subject to a Home Office review. Harvey Redgrave and Ellie Covell examine the case for reforming the formula...
Last year’s Spending Review outlined police funding from April 2022 to the end of March 2025, as part of a three-year cross-Government settlement. This financial year, 2022-23, the Home Office is providing £9.6 billion while £4.9 billion is expected to be raised locally, through a portion of the council tax, known as the precept. In addition, £2.4 billion has been earmarked for policing by the Home Office for counter-terrorism, technology projects and other specific programmes.
It means that in 2022-23, forces will receive an increase in real terms (after taking account of inflation) of 2.8% . Some cash has been ring-fenced to pay for the recruitment of 20,000 additional police officers - the ‘uplift’ programme - which is due to be completed by next March. But because of the way the funding formula works, some forces will be better off than others….
Why the current system doesn’t work
There is now almost universal agreement that the police funding formula, which was devised in 2006, is unfit for purpose. The National Audit Office has twice raised concerns, with a report in 2016 describing the arrangements as ‘ineffective and detached from the nature of policing’. There are two basic problems.
First, the formula fails to take account of the wide variation between forces of the proportion they get through each source of funding. At one end of the spectrum, Cleveland Police gets just over a quarter (28 percent) of its money from the council tax precept. At the other extreme, Surrey Police raises more than half (55 percent) of its funding locally. Across England and Wales, the amount raised by the precept accounts for more than a third (34 percent) of the police’s core funding.
In 2010, when the Home Office began to reduce police funding, they did so by making the same percentage cut to each force. This meant that constabularies which relied more on Home Office grants than on the precept sustained deeper cuts, leading to a growing inequality between forces and, critically, in the service they were able to offer the public. The uplift programme risks entrenching the inequalities further because it has adopted the same funding formula. For example, some forces now have more officers than before the austerity years, while others still have substantially fewer. Analysis by University College, London shows that eight forces have at least 10 percent fewer officers now compared to 12 years ago .
A second key problem is that much of the data underpinning the formula is nearly two decades old and therefore not a reliable indicator of demands on police time. Population figures are based on the 2001 Census, but since the early 2000s, London’s population has grown much faster than the average across England and Wales . Similarly, the formula relies on ‘activity based costing’ data taken from the early 2000s and is not an up-to-date or accurate assessment of how long core policing tasks take.
The most important point is that demands on police time have changed significantly since the funding formula was devised. There has been a steep drop in ‘traditional’ offences, such as burglary and car theft, while the number of more ‘complex’ crimes - serious violence, domestic abuse and sexual offences - has gone up. There has also been a steady growth in ‘non-crime’ demand, with the police increasingly expected to pick up the slack due to gaps left by other public services, around mental health, missing children and anti-social behaviour. These changes in the work police are expected to do are not reflected in the way money is allocated to forces.
Why reform is difficult
The funding formula places a heavy emphasis on population size as a proxy for crime demand (more people equals more demand). Although that has tended to benefit forces with big cities, it has disadvantaged those which have mainly rural populations but which contain significant urban populations as well, such as Bedfordshire and Northamptonshire.
When the Home Office last tried to revise the formula, in 2015, it sought to remedy the problem by taking account of a wider set of socio-economic and environmental factors. These included the proportion of households with no working adults and households with dependent children in a police force area, as well as the density of bars, pubs and licensed clubs. However, the methods were criticised   for being limited in a number of key respects:
The proposed formula did not sufficiently take account of non-crime demand - with 62% of funding still planned to be distributed according to indicators linked to crime
Indicators of crime seemed to be missing drivers of new and emerging offence types, such as cyber-crime, child sexual exploitation and radicalisation
The planned formula ignored the way demand could rise or fall according to the capacity of other public services in the area
It did not take account of how crimes in neighbouring areas might spill across force boundaries
Including ‘bar density’ as an indicator of demand did not take account of changing patterns of alcohol consumption and crime, such as a sharp rise in reports of domestic abuse
The diversity of a police force area, with the demand for language and translation skills, was not a factor
Forces were not able to access all the data (without cost) limiting the transparency of the proposed formula
It did not take into account pre-existing precept levels
The criticisms highlight how complex it is to develop a single formula which accounts for the numerous factors shaping police demand in a rapidly shifting crime landscape. But Crest’s work, in partnership with Justice Episteme, has shown that statistical forecasting, based on historical volumes of incidents and offences, can be a highly effective method of measuring and predicting demand. As an example, forecasting demand in 2021/22 using historical data provided a volume of crime accurate to 97% in one of our partner forces. It may not be suitable for all types of crime and checks should be put in place to ensure police don’t over-record offences to secure funding in the future, but it could be a helpful factor when devising a funding formula.
Aside from the technical challenges, there is a substantial political obstacle to funding reform: it will involve winners and losers. The unfairnesses of the current model may be clear to see, but ripping it up and starting afresh would create new ones - which some forces would find painful. It was reported at the time of the last review that had the proposed formula been introduced certain constabularies would have gained or lost up to 20 per cent of their funding . This time, the Home Office, wary of creating new enemies, may well conclude that inertia is the least risky option. It’s a similar scenario to the Barnett Formula. Designed in the 1970s to determine public spending in the devolved administrations, it has endured despite clear evidence that it is outdated and several attempts to reform it.
The factors Ministers ought to consider
There is a clear public policy case for bringing the statistical assumptions which underpin the funding formula up to date. In particular, population data need to be adjusted to take account of demographic changes. The 2021 census reveals that the population has continued to grow faster in some regions than others. The east of England saw the greatest proportionate increase since 2011 - 8.3 per cent - while Wales’s population went up by only 1.4 per cent. The age profiles of each area also vary significantly - which has a major impact on policing. For example, this map, below, from the Office for National Statistics, shows the wide differences across England and Wales in the proportion of people aged under 15.
Another area that needs updating are assumptions about how long core policing tasks take. As we noted earlier, since the mid-2000s (when activity-based costing ended), police demand - what they are required to do - has generally become more complex. The proportion of offences which centre around victims has increased, violent and sexual offences in particular. These often require additional police time to provide regular contact with and support for victims.
In our work with police forces, we have also found that there has been an increase in the number of crimes flagged as involving features which add to their complexity, such as vulnerable adults, children or substance misuse. In one constabulary, nearly a fifth of offences recorded last year were flagged as involving a vulnerable person. This overall rise in cases where vulnerability is a factor could be due to greater prevalence or better awareness - but the result is the same. Police have to consider and manage issues of vulnerability more often than before, creating additional investigative and safeguarding work for officers and detectives.
The increased complexity of police work has been mitigated to some extent by developments in technology. For example, officers can write reports on digital devices away from police stations so they spend a greater proportion of time on frontline duties than on travel. The flip-side is that the proliferation of smartphones and computers that store vast amounts of data, together with a rise in cyber-enabled offences, has created new demands on police investigators which didn’t exist 20 years ago.
There is clearly a need to look afresh at how demand is calculated in different police forces. It can no longer be viewed simply through the traditional lens of Home Office counting rules, which constabularies use to log offences and incidents. A better understanding could be gained by exploring some of the other rich data collected locally and using a wider suite of socio-demographic indicators. Unless the Government takes a different approach, every police funding settlement will continue to exacerbate inequalities between forces in the resources they have available.
Figure 3 in NAO (2018) Financial Sustainability of police forces in England and Wales: https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/1513/1513.pdf