Our gathering of heads of senior council officers took place soon after a stream of financial announcements, not all of which were bad news for the sector.
The financial settlement, with its balance of funding review, saw both winners and losers while the Government's decision to pick up the tab for a backlog of £4bn of special educational needs and disabilities (SEND) overspend was welcome news for beleaguered finance chiefs. At the same time, the number of councils requesting exceptional financial support (EFS) continues to grow with the total now at 37, costing £1.9bn.
A key issue is the ever-rising demand on council services, mostly in care and welfare, which is tipping councils into EFS. One participant said that ‘so much of our spend is demand and demand is statutory, while users have access to the courts, which means we're agents of the state.'
This mixed picture was reflected in the comments shared by participants at The MJ/TechnologyOne round table debate on Funding the future: local government finances, reform and resilience. One finance chief said cheerily: ‘We'll move from EFS to balanced budget in five years. The settlement exceeded our most optimistic forecasts, while in contrast another added: ‘There's still uncertainty with £2.5m wiped off year three when our authority won't exist under local government reorganisation.'
Another participant added that EFS was a short-term fix and that a radical review of funding was needed – something he admitted was unlikely, since there has just been one. He commented: ‘EFS isn't the answer, it's just kicking the can down the road. Money has just been shifted around. At some point, someone has to do something transformative, like replacing council tax. But no one will do that as we've just had fair funding so we'll just muddle along with EFS. A radical reset will be needed. I'd start with a blank sheet of paper and redesign everything.'
Another participant, however, took the view that having ‘no fair funding review for another 20 years' was a positive. A separate comment was: ‘Fair funding was based on need, which is right, but it lost incentives. We need more cash or more devolution to make the decisions ourselves.' Yet another commented wryly: ‘Fairness is in the eye of the beholder.'
Inevitably, the subject of council tax and business rates featured heavily in the discussion. One guest said that ‘the Government has noticed an enormous variation in council tax but not done much about it' while a London borough director lamented that ‘we're not keeping much of the business rates', adding ‘we should keep more of our taxes locally. Our business community would prefer a flat rate but a tourist tax is less beneficial to us.' A participant pointed out that business could not be regarded as a goose to be forever plucked, saying ‘businesses expect to get good services in return for their rates', implying that budget restraints were actually reducing the council's offering.
One attendee said: ‘Construction has stopped in London and one of the reasons is we tax it so much. The more you tax, the less you get.' However, he still saw other avenues for new taxes saying that: ‘There was an interesting idea in the Budget [taxing electric vehicles by mileage] that the more you drive, the more you're taxed. There are some important streams in the Budget that haven't been recognised.' There were grumbles about other Whitehall departments. One participant felt that ‘Whitehall distrusts local government which is regarded as low on the hierarchy. It's not seen the same at the round table. We did everything we were asked to by government which seems to have been forgotten.'
A finance head complained that they had to shut ‘six to seven schools in the past few years due to falling rolls, but we can't do anything with the buildings as the education department won't allow us.' A key issue is the ever-rising demand on council services, mostly in care and welfare, which is tipping councils into EFS. One participant said that ‘so much of our spend is demand and demand is statutory, while users have access to the courts, which means we're agents of the state.' He said the challenge was not merely resources, but the level of demand and how far the public was prepared either to meet it or to reduce it. He added: ‘We've got a need problem as well as a money problem. Our spending is driven by deprivation and social care. The Government finds it difficult to ration things and yet we're reaching the limit of taxation. The alternative is how to manage demand and help people be resilient. We've lost that focus as a country. The Government has an enormous majority, but won't deal with the difficult issues.'
Another participant commented that ‘national and local government should work together to inform and engage the population about demand management.' One example of extra SEND costs had one guest recalling that ‘we could see what would happen when the SEND legislation was being developed, but officials wouldn't have it. Yet it didn't exist a decade or so ago. We need to redefine what we can do. The trajectory we're on is not plausible. Any government will need to redefine this.' Another even speculated whether SEND should be taken out of local government altogether. One comment was: ‘We've been penalised for delivering the Government's agendas.' In contrast, one participant felt that even with all these pressures ‘there's a lot of need still not being met and in some areas we need to provide more', while another said there should be a further responsibility, adding: ‘The primary focus of local government should be to help young people into sustainable employment. It's not statutory, but it should be above all other areas.' Can individuals make a difference? One attendee said: ‘The individual leader is neither the solution nor the problem. Reform couldn't find a magic wand.
Whoever runs the council will find the same problems.' Despite the challenges, the discussion still ended on a positive note. One participant reminded the table: ‘We should remember we're still providing fantastic services.' Even when it came to a discussion about those councils which had run into financial problems due to investments that turned sour, one participant pointed out: ‘The issues are sporadic and where there are problems they tend to be isolated. You think of the loss of trust in so many other government institutions. In comparison, local government has done a pretty good job.'
COMMENT
By Emma Foy, local government lead at TechnologyOne
Bringing senior leaders together like this creates a valuable opportunity to step back, share perspectives and tackle some of the most pressing challenges in local government finance.
This discussion highlighted the sheer complexity of the current environment for councils. This is not just about a funding gap. It points to a more fundamental shift in demand, public expectations and accountability.
We know that technology has a vital role to play in enabling longer-term change. Access to accurate, timely data helps councils to better understand demand, plan with greater certainty and respond more effectively to change. Connecting financial planning with service delivery is becoming increasingly important, particularly in the context of reorganisation and reform.
Across the sector, there is a clear move towards using digital platforms to improve visibility, strengthen accountability and support a more proactive approach to managing demand, especially in areas such as social care. This must sit alongside a broader focus on resilience and financial sustainability.
At TechnologyOne, we work with councils to strengthen their financial management capability and take a more strategic approach, helping them prepare for the future with greater confidence.
Participants at The MJ/TechnologyOne round table
Mike Curtis, director of financial management, Kensington & Chelsea RLBC
Stephen Hinds, corporate director, resources, Cherwell DC
Tim Jones, departmental finance manager, Southwark LBC
Paul Martin, interim chief executive, Newham LBC
Kevin Gibbs, executive director, communities, Bracknell Forest Council
Ben Malpass, executive vice president, TechnologyOne
Emma Foy, industry lead for local government, TechnologyOne
Heather Jameson, editor, The MJ (chair)
Michael Burton, editorial director, The MJ (rapporteur)
Kasia Brzeska-Reffell, commercial director (The MJ)
Sonia Garcia, event co-ordinator (The MJ)
