The allocation of central government funds is a critical element in the equitable provision of local authority-commissioned and -provided services. A variety of approaches to allocating funding for social services for older people have been used over the years, most recently founded on ‘needs-based’ formulae. In 2004, the Department of Health for England commissioned research to help inform the improvement and updating of the formula. The results of individual-level analyses were compared with the results obtained from analyses of small area (ward-level) data on service users. Both analyses were affected by problems of data availability, particularly the individual-level analysis, and the Department of Health and the (then) Office of the Deputy Prime Minister decided that the formula calculations should be based on the results of the small area analysis. However, despite the differences in approach, both methods produced very similar results. The correlation between the predicted relative needs weights for local authorities from the two models was 0.982. The article discusses the strengths and weaknesses of each approach and developments that could allow a normative approach that would incorporate future policy objectives into formulae that, to date, have inevitably been based on historical data and service patterns
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