Search

The Chasm in Local Government Finances

A chasm in local government finances
Helen Belcher

Helen Belcher

Wiltshire & Corsham Town Councillor

Helen Belcher is a transgender activist and a Liberal Democrat politician

A chasm is opening in local government finances, but is anyone in Whitehall listening to local government leaders?

“We’re the victim of our own success.” says Andy Burns, Associate Director of CIPFA, the local government sector’s accounting organisation. “Local government made the savings [since 2010] because it had to.” he continues.

John Hart, Conservative leader of Devon County Council, said, “Local government is normally an easy target.”

Burns explained that despite being “the best settlement for a while,” in 2021/22, local government has had its total grant cut by around 40% per annum since 2010/11, a reduction of around £15 billion a year in cash terms. Government figures from early in November show that the (constantly renamed) Department for Levelling Up, Housing and Communities (DLUHC) now operates on just over 20% of its 2010/11 budget.

Competing pressures

In his Autumn Statement, Chancellor Jeremy Hunt announced that local authorities would be able to raise council tax by 3% without holding a referendum, with an additional 2% increase allowed specifically for social services. This was the day after it was revealed that inflation was over 11%.

Before Hunt’s announcement, Leader of Oxfordshire Council, Liz Leffman, said that research in Oxfordshire had found that “raising [council tax] by more than 5% will not be acceptable,”. She explained that, when increased by that level, people start expecting improvements in services, whereas the additional money would not actually even fill the financial hole caused by the 10% increase in costs.

It’s not surprising that council leaders are expressing real concern about the impact on their ability to deliver statutory services, particularly around different aspects of social care. Everyone expected Hunt to have local government in his targets.

Changing demands

Unsurprisingly, most concern is around the delivery of social care for both adults and children, to meet increases in need.

“Spain has become unavailable as a retirement destination for some reason.” Brexit has certainly contributed to a perfect storm, adding to increasing demand while the staff pool has decreased. But it’s not the only cause.

Bill Revans, Liberal Democrat Leader of Somerset Council

Hart explains that the COVID-19 pandemic changed people’s expectations. This meant that service delivery mechanisms needed to adapt quickly, particularly to deliver increasing amounts of care at home. He adds, “More children are having support, which is why SEND budgets are getting out of line right across the board. All authorities seem to be haemorrhaging money on this budget line.”

There was real uncertainty about whether HM Treasury would find any funding to replace the (for now) ditched increase in National Insurance, which was supposed to have been targeted at social care. Revans stated that if care reform “comes without funding, then plenty of councils know the outcome and it will not be pretty,”.

Added to this, there are real issues around the abilities of councils to recruit and retain staff at all levels. It isn’t just care workers. The doubling of energy costs, combined with the need to increase staff pay, has led to massive unforecastable problems in council expenditure. Relying on reserves was seen as a necessary short-term measure, but, as everyone agreed, you can’t spend reserves or sell assets twice. “Once you’ve sold assets, you’ve sold them.” said Hart.

Just because inflation might fall, this doesn’t mean that prices will fall. The current price rises are already baked in. A lower rate of inflation simply means that prices will rise more slowly in the future.

shutterstock 2053922438

Continuing jeopardy

A recurring theme in conversations with council leaders was the sheer frustration at their inability to plan ahead. Somerset’s Revans claimed that “Government decisions are being made very late in the day. It makes life exceptionally difficult.” Leffman stated, “It’s the uncertainty that is really most scary.”

CIPFA’s Burns explained that financial settlements are, once again, being made annually. He said that this creates a continuing sense of jeopardy, “Do you run the risk of cutting a service only to find you didn’t need to cut it or keep it on only to find you no longer have the funding for it?” He explained that the four-year settlement, introduced during the Coalition Government, meant that councils could do more medium-term financial planning than they can do now.

Leffman confirmed that it was almost impossible to plan budgets in any effective way. “If you have to wait until February to know what … you’ve actually got, … that is really difficult.” It’s likely that she was being polite, as it’s more-or-less impossible, given that budgets must be finalised by February.

When asked how the Government was managing the distribution of levelling up funds, Leffman replied “Managing? That’s an interesting verb to use.” There was general agreement that using a bidding mechanism for central government funds was, for local government, costly¾it diverts key people away from delivering other services¾and risky¾there was no guaranteed outcome. Any funding received, while welcome, didn’t really address the core problems.

(In)Convenient short-termism

Leffman talked about the need to properly invest long-term in solutions, rather than applying a scattergun, piecemeal approach. She also raised the issue that Whitehall often sees councils as homogenous entities, rather than recognising that deprivation occurs even amidst affluent areas.

Another common complaint was that central government’s council funding programme lacks any form of central vision. Leffman said she didn’t think Whitehall “understands or respects what local councils deliver”. She explained that several Oxfordshire councillors are highly interested in projects like achieving carbon net zero, but that their ambition is simply not facilitated by Whitehall. “Why aren’t they talking to us about what we can do?”

Burns agreed with the premise that we should discuss what government should fund, then work out how much that costs and then work out the best way to fund it. He suspected that the last time that level of strategic thinking had happened, was the 1974 local government reorganisation, with some limited exceptions around what a Scottish parliament and a Welsh assembly would do.

What keeps council leaders awake at night? Devon’s Hart said that the pressure to “take out not just the desirable but also an element of the discretionary,” was unpalatable. Revans said that his “biggest concern is that a difficult winter would make social care difficult to deliver. If we fall over, the NHS falls over.”

Share

Related Topics

Latest

Video Features

On the Campaign Trail with Sian Berry: The Green Party Hoping to Becoming a Fighting Force

On the Campaign Trail: In Conversation with Lib Dem Parliamentary Candidate Victoria Collins

On the Campaign Trail with Labour's Darren Rodwell: A Lifelong Commitment to Barking and Dagenham

Insights from greater:SATX on UK-Texas Trade Deal and Cybersecurity Collaboration

Subscribe to our newsletter for your free digital copy of the journal!

Receive our latest insights, future journals as soon as they are published and get invited to our exclusive events and webinars.

Newsletter Signups
?
?

We respect your privacy and will not share your email address with any third party. Your personal data will be collected and handled in accordance with our Privacy Policy.

Never miss an issue by subcribing to our newsletter!

Receive our latest insights and all future journals as soon as they are published and get invited to our exclusive events and webinars.

Newsletter Signups
?
?

We respect your privacy and will not share your email address with any third party. Your personal data will be collected and handled in accordance with our Privacy Policy.

Never miss an issue by subcribing to our newsletter!

Receive our latest insights and all future journals as soon as they are published and get invited to our exclusive events and webinars.

Newsletter Signups
?
?

We respect your privacy and will not share your email address with any third party. Your personal data will be collected and handled in accordance with our Privacy Policy.

Newsletter Signup

Receive our latest insights as soon as they are published and get invited to our exclusive events and webinars.

Newsletter Signups
?
?

We respect your privacy and will not share your email address with any third party. Your personal data will be collected and handled in accordance with our Privacy Policy.