Andrew Jepp 16 January 2017

Devolution: what’s in store for local authorities in 2017?

2016 was without doubt a year of significant political change for the UK. The uncertainty created by the UK’s historic vote to leave the European Union, not to mention the change in Government that followed, has left even the most informed observers wondering what 2017 might bring.

But with council chiefs now firmly back at their desks after the festive period, they will be bracing themselves for yet further powers being handed down to them from Whitehall over the course of this year.

Many council chiefs will be wondering whether 2017 will bring the kind of radical changes we saw last year, when the introduction of the four-year financial settlement for town halls brought with them gradual cuts in funding from Whitehall and a move towards the 100% retention of business rates and council tax by 2020.

While we are not likely to see changes as radical as this in 2017, the chancellor’s Autumn Statement in November was a clear indication that the Government’s devolution agenda is far from complete. Philip Hammond insisted that devolution remains ‘at the heart’ of the Government’s approach to supporting local growth, and set out a new package for local authorities. New mayoral combined authorities are set to be granted new borrowing powers ‘in order to reflect their new responsibilities’.

As well as this, the next round of the local growth fund will be redistributed regionally, and we can expect a strategy for the ‘Midlands Engine’ to be set out imminently.

Most council chiefs will welcome the new responsibilities and the extra control that devolution gives them over public service delivery. However, such responsibility does not come without risks attached, and local authorities will need to ensure that they are ready and able to manage these risks effectively so that essential services do not suffer.

One key aspect to consider in managing such new risks are financial skills. Councils will need to become far more commercially minded as new responsibilities, especially those around welfare and social care provision, are likely to require additional funding. Local authorities will need to assess whether they have the expertise to work in this way, and if not, bring it in as soon as possible.

Another key concern will be cyber risk. With councils responsible for significantly larger budgets than they have managed in the past, councils could become a more attractive target for fraud and the quickly maturing threat of cybercrime. Local authorities will have to ensure they are equipped to prevent and, should they occur, manage such incidents.

Perhaps most importantly, councils will have to manage the public’s expectations across more touch points. Greater responsibility over budgets and spending decisions will inevitably be reflected in the way local residents view their councils in terms of accountability for public service standards. This is especially important given that many councils will choose to outsource some of their new responsibilities to external providers.

Local authorities must make sure that they have robust processes in place to manage contracts effectively, ensure high quality even when services are provided by third parties and, in the event that something goes wrong, to resolve issues quickly.

Over the last few years, councils have proved highly resilient, demonstrating remarkable innovation and thriving in the face of significant challenges. The handing down of yet more powers from Whitehall will give local authorities unprecedented flexibility over public services, and present them with fantastic opportunities to make positive changes in their communities. But councils will also need to ensure that these extra powers are exercised responsibly.

There is no 'one size fits all' approach and chiefs should work with their partners to put together a robust risk management strategy reflecting their new, devolved operating environment.

Andrew Jepp is managing director of Zurich Municipal.

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