Spending review: Treading water next year is our best hope

By Sir Stephen Houghton | 30 November 2020

After a decade of cuts, that disproportionately hit urban authorities, councils faced an extraordinary mix of additional spending pressures and income losses caused by COVID. These were not limited to the first lockdown in March and April – many councils, particularly those in the North and Midlands have faced most of the last eight months in lockdown with pressures continuing to build.

There is a growing funding crisis in social care in particular, exacerbated by absence of a national strategy and a sustainable funding structure. The Government has failed to provide the long-term stability the sector clearly needs and asked for.

Over the last 10 years council budgets have become increasingly dependent on their local tax bases. In 2010 Council Tax contributed 43% to budgets;  this year it is 60%. This means that wealthier areas can raise more – a 1% increase raises twice as much in leafy Richmond than Stoke or Leicester. To compound this, areas with lower tax bases tend to have relatively greater need. Where you live has a big impact on the quality of care your council can afford!

Despite multiple warnings from the sector, the chancellor has continued this regressive path. The majority of the increase in spending power in 21-22 comes from an assumed 5% increase in council tax. The new social care grant of £300m to cover both adult and children’s social care is just over 1% of the combined budgets of £27.5 billion. To hold the revenue support grant flat with inflation at a time when costs are rapidly increasing above inflation combined with an aging population and the coronavirus pandemic causing severe strain for the sector, is damaging and very short sighted. The fact that Council Tax, not needs, determines funding for care goes directly against the government’s ‘levelling up’ agenda.

The government interpretation of ‘levelling up’ is, typically, new capital build projects. While they are important, I have always argued that fair funding for quality public services are the highest priority and of primary importance in any levelling up agenda. Sadly, the capital projects that will form a central part of the ‘levelling up’ agenda come with a flawed model of delivery. The UK Shared Prosperity Fund will likely be smaller than what we might have expected from staying the in EU.  Even now, despite the fact that the current arrangements will run out in 31 days’ time, we still await details.

While it is admirable that the government have created a fund to address the imbalances between London and the rest of the country it remains to be seen whether it will have that effect. Tragically, the government have chosen to double down on their ‘Westminster knows best’ dogma that has hampered much of the pandemic response. To create another centrally controlled pot with competitive bidding, fundamentally misunderstands what is required. To ignore existing knowledge networks and devolution deals in favour of Whitehall Departments, with the support of MPs required, is the wrong move and is a ‘hollow victory’ as described accurately by Director of the Northern Powerhouse Partnerships Henri Murison.

With both the Shared Prosperity Fund and the Levelling Up Fund, transparency is the key. Councils must understand and support the criteria for allocations and it should not be left to the loudest voices in parliament to decide who benefits. Government have made a promising start by creating the fund but “levelling up” cannot begin and end with this.

Finally and most emphatically the decision not to reset business rates will be a huge disappointment to most of our members, as it will be to the HCLG Committee who included it in their principal asks. It is clear evidence of a divisive funding system that goes back on Government’s assurances for business rate retention when it was introduced in 2013.

So, while there are some individual elements that can be welcomed, taken as a whole, Spending Review 2020 is a missed opportunity and will mean the best that many of our councils can hope for next year is treading water. For the worst off, a crisis of insolvency or service failure still looms.

Cllr Sir Stephen Houghton is leader of Barnsley MBC and chair of the Special Interest Group of Municipal Authorities (SIGOMA)

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