More burden-sharing than burden-busting

By Dan Peters | 07 July 2020

In the run-up to communities secretary Robert Jenrick’s speech at the Local Government Association’s conference last week all the talk was of a big announcement.

Always speaking in soothing tones, Mr Jenrick appeared at pains to reassure councils that everything would be OK while his senior officials pleaded with local authorities to keep calm and not do anything drastic like pull the trigger on a Section 114.

After two tranches of £1.6bn – the first allocated in response to adult social care pressures and the second taking more account of lost income – ministers appeared keen to end the repeated cycle of individual funding announcements.

Instead, the sector was told that Mr Jenrick and local government minister Simon Clarke had been locked in talks with chancellor Rishi Sunak to secure a longer-term deal.

There was excited talk of a ‘comprehensive plan to ensure councils’ financial sustainability over the financial year ahead,’ which would allow the Ministry of Housing, Communities and Local Government (MHCLG) to get on the front foot with a proactive announcement.

The announcement finally came in a press release on Thursday morning – a few hours before Mr Jenrick’s speech, timing that was presumably orchestrated to soften the clamour for more cash ahead of his appearance.

But it was soon clear that the latest package, which included an unringfenced £500m, allowing council and business rates tax deficits to be repaid over three years instead of the usual one and a formula that would spread the burden of income losses between local authorities and Whitehall, was not the solution the sector had in mind. It was more burden-sharing than burden-busting and miles away from the Government’s initial vow to support local authorities in full.

Chair of the Special Interest Group of Municipal Authorities, Sir Stephen Houghton, warned that the risk of ‘significant cuts and s114 notices has not gone away’ while chair of London Councils, Cllr Peter John, said £500m for all councils in England was ‘wholly inadequate’ and ‘another short-term stopgap solution’.

The Local Government Association, which often struggles to say anything meaningful due to its finely-balanced politics, took almost five hours to clear its response, with chairman Cllr James Jamieson breaking his silence four minutes before Mr Jenrick started its speech to say more cash was ‘desperately needed’.

With no major surprises in the speech, disappointed council finance directors didn’t take long to start asking when the next tranche of cash would be coming – hardly the response Mr Jenrick would have wanted to engineer.

Instead, the £500m presumably prepares the path for more intra-sector warfare when the formula-based allocations are announced and, over the coming months, the volume of calls for more cash will grow again.

In addition, allowing council and business rates tax deficits to be repaid over three years merely stretches out the problems into future budget years.

Chris Buss, who was Wandsworth LBC’s Section 151 officer for 11 years, said: ‘The issue about spreading collection fund deficits down the road and allowing them to be recovered over three years is just kicking the can down the road. It provides no real assistance and effectively means that, despite government rhetoric, for councils, austerity is alive and well.’

One positive of the income guarantee is that councils will effectively be able to reallocate cash from the second tranche that they had thought they would have to use to cover losses to cover expenditure.

But one gaping hole from the announcement was any mention of commercial income, losses from which the Government is reluctant to cover.

Instead, the Treasury, which is currently consulting on a proposed crackdown on local authorities using cheap finance to buy commercial property for rental income, is taking a tough line, refusing to cover councils lost income even from investments within their boundaries.

MHCLG officials are understood to realise that this means some councils may still need more financial support from the Government and the department, which plans to continue its monthly financial monitoring of local authority pressures, insists its door remains open to any local authority that has exceptional concerns.

The ministry had hoped that last week’s announcement would be its final offer but, with council finance directors insisting that it’s definitely not enough, we definitely haven’t heard the last complaints from the sector.

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