The use of indicators for targeting public expenditure: the Index of Local Deprivation

The UK government places considerable emphasis on the targeting of resources to areas most in need. For the Single Regeneration Budget and other purposes, use is made of the Index of Local Deprivation (ILD), formerly the Index of Local Conditions (ILC), to identify eligible areas. In this paper we show that this index suffers from such serious structural defects that it is unsuitable for the purpose to which it is put. These defects include the scale dependency of the index, the inappropriate treatment of positive and negative numbers, the unequal weights assigned to the indicators used and the difficulties introduced by using a nonlinear structure for the index. Recent decisions to modify the ILD do not address these defects and one change that has been mooted would exaggerate the scale bias. Suggestions are made for what should be done in replacing and supplementing the ILD to provide a better basis for assessing relative need.