EXCLUSIVE: Avoiding the precipice

By Heather Jameson | 13 March 2019

Two years ago local authorities were in denial. Councils had lost 40-50% of their income and were struggling. But despite the woeful state of their finances, they were labelling their financial coping strategies as transformation and lying to the public about how bad things were.

That was what The MJ reported following a brutally honest interview with the Society of Local Authority Chief Executives (Solace) finance spokesperson Martin Reeves and the chief executive of the Chartered Institute of Public Finance and Accountancy (CIPFA), Rob Whiteman. Two years on, back in the same office, with the same finance experts, the financial picture is worse. Local government is now estimated to have lost 50-60% of its funding since 2010. The question is, is the sector being more honest?

Mr Reeves thinks so. Since Northamptonshire CC issued the first s114 notice for two decades in February last year, the debate has opened up across the whole of local government.

It kicked off a number of ‘high profile discussions, from the Public Accounts Committee, the National Audit Office and from CIPFA on the lack of money coming into the sector and the impact that has had on services’, he says.

‘All of that maelstrom over the last two years has meant it is in the consciousness, and many more local authorities at leader, chief executive and finance director level are openly talking about the cliff edge, the precipice, the fact that different strategies are required.

‘That doesn’t mean there has been sufficient addressing of the strategy as a result of that, both at central level and at local level.’

Mr Whiteman agrees: ‘The plight of the sector is acknowledged, but also there is better understanding of it. We don’t just refer to financial pressures as one item.’ People now see the particular pressures of adult social care, children’s services and around non-statutory services.

‘It doesn’t quite help the sector yet, because I don’t see overt or explicit action by Government to sort out social care funding through the green paper or to allow local authorities a resource base that means non statutory services can be provided where needed, but I do think there is a much better understanding of where we are.’

The debate has shifted now from a simple discussion about a lack of cash – in particular for adult social care – to a better understanding of the implications, although it’s still at an aggregate level. ‘It is not just there is more consciousness, there is a much more sophisticated understanding of where that pressure is coming,’ Mr Reeves says.

And it has opened up the debate about the strategies to address the funding gap – including income generation, commercialisation, traded activities, the use of assets, the relationship between revenue and capital and ‘thinking about technical ways in which we can get ourselves headroom’.

‘What I, quite frankly, can’t rely on is a solution of additional significant funding from central Government, so therefore there is a requirement for local government to determine how it can create strategy to avoid the precipice.

‘But clearly we need more funding and more surety from central government. There is absolutely no doubt about it.’

Recent tragic events around knife crime have highlighted some of the issues around the non-statutory services – like community support and youth services – which have not been protected from the cuts.

Much of the debate on knife crime has centred around policing – just as adult care issues often focus on the NHS – so is there a danger resources will be directed to silo services by politicians keen to ‘fix’ rising issues, rather than focusing on prevention?

Mr Whiteman suggests there is. ‘Prevention gets a bit harder for everybody years and years into austerity because people are looking at their own budgets.’ They may not stop to think about cost shunting when they have to make tough choices to balance their own books. But local government doesn’t always help itself.

‘There is a realisation the sector doesn’t necessarily speak as one in the way health does. We do get rivalries…which you don’t see happening elsewhere. While everybody recognises that, it’s really hard to put right.

‘The sector could help itself by speaking with one voice…but nobody quite knows how that is achieved.’

Mr Reeves agrees, adding that while each individual body makes its own evidence-backed case for funding, it ‘atomises the debate about the differential issues’, but it is secondary to the primary point. ‘How can we lobby as a sector for the fact that we have insufficient funding to be able to deliver the kind of society, the kind of services we know our people deserve and need’.

In the West Midlands, in his day job as chief executive of Coventry City Council, Mr Reeves has debated with chief constable Dave Thompson about public health approaches and preventative funding for issues. ‘It’s got to be where we stand together.’

‘It’s problematic for the police that they continue to see their local authority partners hamstrung by the continued reduction of funding as it is for their own core funding.’

Mr Reeves suggest the sector needs ‘a grown up conversation about the power of our own department within government, our ability to lobby strongly, but above all moving beyond that short-term emergency fix to a medium-to long-term solution which rebounds local government to be at its best working in a collaborative space.’

When it comes to prevention, local government and the police haven’t got figures on how much is spent. Mr Whiteman suggests the sector needs the tools to measure performance and know what prevention costs, and whether it is working.

‘Now is not the time to put extra reporting requirements on local government, but down the line, CIPFA quite likes the idea of developing a definition of prevention and showing in the accounts, on a memorandum basis, what is spent on prevention, and then persuading health and government they need to do the same in their accounts.’

A decade into his post as Coventry chief, Mr Reeves says he was leading on the Total Place project when he arrived – and he would like to see local government leaders ‘reimagine that’.

He agrees there is no sense in creating a ‘massive set of hard metrics’ – but in order to win the argument for investing in prevention, and working together across public services to deliver better outcomes then the sector needs to understand how to measure and who is going to be held to account.

Total Place failed to deliver because there were too many technical issues, about where the money came from versus who benefited from the outcomes, and who was held to account, Mr Reeves says.

‘Someone needs to tell me if, 10 years on, whether we have the mechanisms in place and the behavioural shift to be able to make that happen yet. I would argue we haven’t yet and therefore we do need to go after it.’

The gap left by the Audit Commission needs a mature debate. ‘We could argue much more convincingly for significant and enduring funding to deliver for our places if we were to have that maturing of debate.’

Mr Whiteman agrees: ‘What gets measured gets managed.’ But it goes back to timing. ‘Because of austerity, it is really hard to work on things that might help for the future but don’t balance the books now.

‘But the truth is, everything we measure is organisational and at some point, looking at the budget for total place and looking at its balance sheet will be the solution, together with appraisal methods of investing in prevention that are then measured.

‘I think the Government has run out of steam on that – everyone has run out of steam.’

That mature debate also needs to extend to the measures being taken by councils to shift themselves into financial independence, such as commercialisation. In reality, some authorities are doing it really well, while others are performing really badly. There are risks, capacity issues and audit considerations that should all be part of the debate.

According to Mr Reeves, we need to be brave enough as a sector to call out poor performance, but that doesn’t mean all authorities should be judged on the level of the worst.

‘The councils I see making the most of a commercial agenda are the ones that worry most about the risks,’ Mr Whiteman states.

The fear is that the sector rushes forward on commercialisation without a clear strategy, and without due diligence in an attempt to chase financial security. As Mr Reeves points out: ‘The way the markets are flipping at the moment, there is an inevitability some will go wrong.

‘How do you handle that? How does the resident population handle it? How does the media handle it? It’s a really important conversation. If you have one failure, do you recalibrate your entire approach? We haven’t had that conversation.’

Local government has always struggled with a concise narrative, but clarity would help strengthen the case for more money and more devolution. Mr Whiteman argues the sector needs to speak as one across each tier.

‘Having been a senior civil servant, I can’t tell you how badly it lands when local government comes in with a very parochial view about its own tier or its own geography and the unique reasons why it can’t do the right thing because it has difficult relationships to manage.

‘It’s all true but it lands badly, and we have got to overcome that. But when you are being battered round the head, how do you create the environment to be strategic and do what is right for the medium term?’

Mr Reeves suggests: ‘There is an existential profound set of conversations around what kind of public services this country wants needs and deserves…What is the relationship between public services and our people?

‘The narrative has not moved on, but we need to talk about services rather than structures to engage the public.

‘This immediacy will not last forever. We’ve got to find a way to build a new future while we are in this amazing and challenging pinball machine of collateral ricochet effect. We’ve got to find a way of thinking about our future, with our communities, not at them.

‘That will solve the major challenges we have at the moment around rough sleeping, knife crime and some of the other horrendous social problems we face.’

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