Each local authority is allocated a budget from central government to fund social security benefits, known as ‘combined funding’. If the budget is insufficient to fund all the benefits, the local authority has to compensate the shortfall with its own funds. The local authority is allowed to keep any surplus. This system incentivizes local authorities to re-ingrate benefit recipients. The Ministry of Social Affairs and Employment would like to improve the allocation of the combined funding among local authorities. It has decided to develop four allocation models for this purpose, namely (1) Improving the Current Model, (2) Multi-Level Analysis, (3) Difference Analysis and (4) Trend Model.

This study describes the trend model, which combines history and objectivity. The model takes local authorities’ actual expenditure in a particular base year as the basis and adds to this the objective trend in benefit expenditure. This objective trend is estimated on the basis of non-influenceable factors. Local authorities will thus be given a budget for their non-influenceable expenditure and encouraged to bring down their influenceable expenditure.