Crafting a solution for our sector’s funding

By Rob Whiteman | 22 May 2019
  • Rob Whiteman

The local government landscape has just changed more profoundly than perhaps any of us expected. Large numbers of Conservative councillors, and some Labour, have lost their seats, while large numbers of Liberal Democrats, Greens and independents have been elected to replace them.

This cohort of new councillors will soon begin the budget planning cycle for 2020/21. As they do so they are faced with perhaps the most uncertain financial context local government has faced for a decade.

Questions remain unanswered about the shift from grant funding to business rate retention and we still await clarity on the outcome of the fair funding review. According to the Government’s timetable, authorities were set to transition to the new arrangements from April next year. And that is before we factor in Brexit. As we all know, the Government missed its target date for leaving the European Union, the European elections are back on and we’re no closer to knowing what the terms or timing of our departure will be.

Against this shifting and uncertain backdrop, how possible is it for councils to deliver excellent financial management? How can excellence flourish if the conditions are highly uncertain?

At the Chartered Institute of Public Finance and Accountancy (CIPFA), our concerns about the volatility of local government finance have been increasing. We have therefore asked whether it is better to slow down, take stock and iron out unintended consequences. This could include a one-year delay to the outcome of the fair funding review.

We are past mid-May and still awaiting a steer from Government on how it plans to take its fair funding review ambitions forward following the consultations that ran last year and earlier this year. When these do emerge they are likely to be quite late in the medium-term budget planning process.

Important as updating and refreshing the funding model is, we know that many local authorities would welcome a delay to what will be a significant change. It’s important to get change right and not rush it through to allow authorities time, of at least a full financial year, to prepare and ensure successful delivery.

We do recognise, however, that some councils, for example in particular many counties, are grappling with huge financial demands around adult and children’s social care and are vulnerable in terms of financial resilience. Counties are looking forward to a fairer funding settlement and we appreciate that any delay could seem like a bitter blow. CIPFA will continue to demand that any settlement going forward reflects the particular needs of the most hard-pressed councils.

More than anything, the sector as a whole needs stable, future-proofed planning.

A delay would also clear the path for a serious and focused discussion with Treasury in what is almost inevitably going to be a delayed comprehensive spending review (CSR) about the quantum – that is, the size of the funding envelope for local government – and how we can maximize ongoing opportunities for local government funding in the long-term.

CIPFA has been part of sector lobbying about the level of local government funding for a number of years now. We’d like to see Whitehall show political willingness through a CSR process to have an open dialogue about long-term funding issues and sustainability as part of, rather than following, a solution of fair funding. We have seen reports and reviews, but relatively little detail at this stage.

Rhetoric is no longer enough and action must be taken if we are to preserve the essential and highly valued services provided by local government.

Rob Whiteman is chief executive of the Chartered Institute of Public Finance and Accountancy

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