Funding reform – or bust?

By Martin Reeves | 04 April 2018

My SOLACE colleagues and I did not really expect the chancellor to throw local government a lifeline in the Spring Statement but it was nevertheless disappointing not to see any recognition of the urgency of our situation.

Anyone familiar with my past writing will know that I’ve been warning for some time now that the status quo cannot hold in the face on ongoing austerity, demographic change and technological advancement, let alone a seismic shifting development like Brexit. The National Audit Office’s (NAO) latest report on the financial sustainability of local authorities should have been a wake-up call for Government that they cannot maintain the pretence that everything is fine and as it always was.

Full disclosure: I never actually felt that we should defend or preserve the status quo. I believe we can do better, much better. What we had – and continue to have – is a once in a generation opportunity to modernise our public services and make them about people, places and outcomes, not structures and organisations.

There are many examples of councils leading precisely this sort of innovation in their local areas as a response to austerity. We’ve seen councils radically reinventing their role from one of paternalistic provider of top down services to tapping into the capacity, ideas and expertise of residents to do things for themselves and each other. Local authorities are brokering conversations about all of the assets across a place and how they could be used more effectively. We’ve seen the joint funding of teams with health and police colleagues so that residents are no longer sent from pillar to post seeking support and we all make better use of the public pound. And across the country, councils are becoming more commercial and indeed entrepreunerial to generate more income and to stimulate physical and economic regeneration.

In my own local authority, Coventry City Council has a proud track record of transformation through investment in digital infrastructure as well as innovative commercial partnerships. For example, when in 2009 reductions in direct Government grants and revenue funding started to bite; the city council undertook a strategic review of ICT, which culminated in the exiting of its externally managed contract and in-sourcing of the service. Not only has this led to annual savings of £5m, we have also achieved far higher levels of user satisfaction; unprecedented levels of investment in our infrastructure and we have formed an innovative and successful partnership with CityFibre to deliver our Gigabit City aspirations.

In terms of new asset-based approaches and harnessing the potential of all our residents and stakeholders in the city, particularly the ‘unusual suspects’, we grew Coventry on the Move. This is a multi-disciplinary social movement aimed at increasing levels of physical activity across the city.

Using the power of public health coming rightfully back into the local government family and our strategy as a Marmot City, this approach (having spent less than £200,000) has already shifted participation rates for children and adults, noticeably within the more deprived areas of the city where activity levels were far lower than the average. Furthermore, this programme has been the catalyst and blueprint for West Midlands on the Move – the physical activity strategy for the West Midlands Combined Authority, led by the Mayor.

But my colleagues will tell you that we have gone as far as we can within the system we have at present. That is why there was a degree of grim satisfaction that the NAO report bore out that local government has not been making special pleading when we have warned that we cannot go on this way.

The NAO report confirms we are indeed reaching breaking point. Eight consecutive years of funding cuts have seen many councils lose half to three-quarters of their controllable budgets. Almost a million fewer local government staff across the country translates to workforces that are half the size they were in 2010 in many places. All the while, pressure has been growing to support older people with care needs and younger adults with learning disabilities, to safeguard children living in unsafe home environments, to help those who are homeless or at risk to access stable housing. The Local Government Association estimates the overall funding gap for councils will be over £5bn by 2020.

What worries us most now is the uncertainty we face. Perhaps the one saving grace of the past few years has been the four year settlements that the Government offered councils. Although they didn’t stop the Government chopping and changing policy that affected our bottom lines, the settlements did provide a helpful basis for planning purposes. They enabled us to provide credible advice to elected members about their choices, trade-offs and risks over the medium term.

Councils may not be businesses per se, but we are major employers and investors in our own right. Like any other business, we need stability, certainty and flexibility in order to operate effectively. We are now headed into what SOLACE President Jo Miller has described as ‘the abyss of uncertainty’. Most councils will tell you that they cannot be certain what funding they will have after 2020, which is making financial management and workforce planning extraordinarily challenging. And now the Government has introduced another element of uncertainty into the mix with the chancellor’s announcement in the Spring Statement that the next business rates revaluation will be brought forward to 2021, making it even more difficult for councils to forecast their future income.

It is both disappointing and alarming that the Government’s current preoccupation is with how funding could be distributed between local authorities in future, rather than ensuring that the overall quantum is sufficient to meet current and future need. The Fair Funding Review has started the funding discussions with the wrong question and is silent on the more fundamental question of sufficiency. This just is not good enough. Our residents, communities and employees deserve better.

We cannot wait until the next Comprehensive Spending Review in 2019 for a sustainable solution. In its characteristic measured fashion, the NAO has warned that ‘the financial uncertainty created by delayed reform to the local government financial system risks longer-term value for money’. They have echoed our call for a long-term financial plan for the sector that includes sufficient funding to address specific service pressures and secure future financial sustainability.

It is still possible to avoid the precipice. It is still possible to do even better than that and radically transform how we make use of all public spending in our places to secure better outcomes for people, without actually having to increase public spending. But it will take ambition, will and courage. Local government is willing to step up to the plate. We need central government to step up with us.

Martin Reeves is SOLACE spokesperson for local government finance and chief executive of Coventry City Council

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