Equalisation of municipal input costs in England: matters of principle and practice

The considerable academic literature on the assessment of municipal expenditure needs has generally paid much less attention to compensation for relatively high input costs. This is all the more surprising given that regional variations in input costs are a major cause of differences in municipalities' per capita expenditure needs. This paper considers the recent review and reform of the way in which account is taken of variations between English municipalities in the costs of their inputs. It discusses the arguments for and against equalisation of input costs and the advantages and disadvantages of the various possible ways in which to compensate municipalities for those input-cost differentials. Notwithstanding the recent reform, there remain a number of fundamental criticisms.