Joe Fyans, head of research at Localis, looks at what local government needs to hear from the Chancellor in the Autumn Statement.
What does local government need to hear from the chancellor in the Autumn Statement? The knee-jerk answer to the question from many is likely to be something along the lines of ‘some more money, please.’ And for good reason. The Local Government Association (LGA) estimates the budget gap at £6.2bn over the next two years – this is to keep things as they are, not improve them.
In this short piece I will try to unpack that blunt answer by spelling out how to get from where we are, to where we need to be. Where we are is a system of short-termism which too often leads to perpetual crisis management at local level. Where we need to be is a council financing system which works properly.
A local government fiscal framework which works properly would be one which allows councils to set long-term budgets, where they could invest in upstream preventative services to minimise pressure on the front-line. Where councils could engage in long-term placemaking, working to realise the ambitions of economic growth and national renewal which proved so effective for the Labour Party at the ballot box in July’s general election. This cannot be achieved through devolution deals alone and must be rooted in endowing councils with proper strategic and operational capacity.
This is a far-cry from the current arrangement, which for many authorities mostly revolves around reacting to escalating costs across a few key service lines. Generally speaking, these are for the provision of Special Educational Needs (SEN), social care and temporary accommodation (TA) services. The nature of the crisis means that all kinds of additional capacity constraints, particularly around workforce planning, are tied up with the increasing orientation of council finance towards addressing these issues.
To some degree, the difficulty funding these services can and should be dealt with via a short-term cash injection, to stabilise the books and preclude the further defunding of other services. Quite apart from the immediate benefits of staving off another round of section 114 notices, this would also work to prevent a continuation of the cycle of decreased local services for higher council tax charges which has been the reality for most residents – who do not use SEN, social care or TA – and the driver of so much dissatisfaction with local government in recent years.
Beyond the need to stem the bleeding however, the Government must use the budget and spending review as a way to chart a course to proper treatment of the problem. Some cause for optimism to this end could be found in the commitment made by the Chancellor at the Labour Party conference to review the Treasury’s approach to capital investment. If this means the allocation of greater capital funding for building social and genuinely affordable housing, then it can be seen as an investment to reduce over time the increasingly debilitating pressure of TA costs on council performance. The root cause of such costs is, after all, the historic underinvestment in such housing.
Adequate provision of SEN and social care services, however, are not problems that can be solved through capital injection. These are year-on-year, demography-based pressures which require increases in revenue funding to meet demand. They are, ultimately, problems of tax and spend, which are greatly complicated by the already high tax burden of UK citizens and the pre-election pledge to avoid raising any of the national taxes on working people - which make up the majority of the take. Council tax reform has long been seen as a political red line which if crossed would trigger untold electoral misery. Yet we must surely be approaching the point at which the issue can no longer be avoided.
A commitment to begin the hard work of reforming local government’s revenue-raising powers must therefore be included in the Autumn statement. It is the only route to significantly improving the position of councils in providing these vital services that has not already been ruled out explicitly. This, combined with the interim measure of an injection of extra funds to support delivery and further detail on a spending review which would enable capital investment in social housing, would be sure steps on the path to renewal. The end goal has to be councils which can, in a fiscally sustainable way, provide quality services for the whole of the population and reverse the marked decline of less or worse local provision at greater expense which voters feel so sharply.
