It is widely acknowledged that the local government funding system is broken.
There isn't enough money in the system. Total funding is still down by about £13bn in real terms across England compared to 2010/11.
Existing funding isn't distributed fairly. The Institute for Fiscal Studies found that the 20% most deprived local authorities receive a share of funding that is 9% lower than their share of estimated needs, whilst the 20% least deprived local authorities receive a share of funding that is 15% higher than their share of estimated needs.
And there is no certainty in the system. We've had half a decade of single-year settlements, a proliferation of grants defined by competitive bidding, and reforms promised then not delivered. One of our finance directors told us it was ‘like budgeting with a blindfold on'.
So, how do we fix this?
In recent weeks we have heard the new government make all the right noises. Namely, it has been welcome to see a return of local government to a government department's name
Fundamentally, we need more money, and not just from council tax. This is not just council leaders saying, ‘we need more money'. There is a mismatch between what we are expected to do and the resource we have. The LGA has identified a £6.2bn funding gap just to tread water. Pressures remain and without more funding in the pot, many councils are at risk of a Section 114 notice.
We need to distribute existing funding more fairly. In the short-term this means better allocating the money in the settlement. Grants such as the New Homes Bonus, Rural Services Delivery Grant, or Funding Guarantee could be allocated on a needs basis. Once we've done that, we should look to reset the business rates system to return about £1.5bn of growth back to needs, and get the Fair Funding Review sorted, including Council Tax equalisation.
And importantly, we need to return stability to the system. This means bringing back timely, multi-year settlements, consolidating funding pots, greater grant flexibility, and ending competitive bidding for funding. We need clarity too about funds such as the Household Support Fund and UKSPF before they are about to finish, rather than the last-minute announcements the sector has become used to.
In recent weeks we have heard the new government make all the right noises. Namely, it has been welcome to see a return of local government to a government department's name. This is a step in the right direction for recognising the importance of local government. Hopefully this positive start will be followed by the changes we need.
Cllr Sir Stephen Houghton, Chair of the Special Interest Group of Municipal Authorities (SIGOMA)
