Carving out a financial solution

Local government finance has been in the news a lot recently. Nothing unusual about that in the pages of this magazine of course, and it has always been a feature of local news, but historically it has been a hard sell to national media outlets.

That seems to be changing and in this month’s column I want to reflect on why that is, what it tells us and how, as a sector, we should respond.

There have been three key moments in recent weeks. As budgets were set there was much focus on the agonisingly deep cuts made in Birmingham and in Nottingham. Our annual state of local government finance survey at LGiU generated a lot of attention as it revealed decision-makers in half the councils in England fear that unless there is reform of local government funding, they could be forced to issue a section 114 within the next parliamentary term.

The Budget imposed future cuts on local government and – while there were a series of individual funding announcements – there was no attempt to reduce the overall pressures on the system, allied to anger about the chancellor being reported as suggesting that wasteful council spending on diversity was the real problem.

I will not rehash the details of these stories, but what is interesting is the change in the way they are discussed. Having spent far too much of the last decade talking about declining council finances, I notice four big changes.

First, the conversation is finally shifting from a focus on individual councils and their failings, real or perceived, and starting to look at the overall system within which councils are operating.

Up until now the Government has been able to position council failures as the result of poor decision-making rather than systemic failure, but with half the councils in the country warning of potential financial failure, that framing is being questioned.

Second, we are starting to see a recognition of the consequences of council failure. There is genuine shock within the wider media at the scale of cuts that places like Birmingham are having to make and the impact this has, not just on the services provided by the council, but at the knock-on effect across the public sector and the ways in which it damages the lives of ordinary citizens.

This in turn is beginning to generate a more profound debate about what – and who – local government is actually for. Rising council tax at a time when two-thirds of councils are cutting services – cuts that inevitably fall hardest on non-statutory services – begins to raise questions about our expectations of targeted v universal services.

Finally, we are finding a lot more interest in potential solutions and this is where the opportunity lies for the sector.

There is a growing consensus in local government about what the initial elements of reform should be: an end to wasteful bid funding (take note Jeremy Hunt), a return to multi-year funding settlements and the reintroduction of a needs-based funding formula.

None of these things are a panacea. They will not solve the problem for ever. But they will stabilise the situation, giving councils clarity and an ability to plan over the medium-term.

When we look at longer-term reform – which we will need – there is less consensus about the way forward. Reform of council tax, shares of national taxation, new revenue streams all have their supporters and their detractors.

What is crucial, though, is that we do not allow differences about our final destination to prevent us – as they have too often in past – from speaking with one voice about the first steps on the journey.

Every new story about local government finance underlines the urgency of the situation. In an election year the media narrative is sure to shift, but right now there is a focus on local government and we should take advantage of it while we can.

Dr Jonathan Carr-West is chief executive of the LGiU

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