What lies ahead for local government?

With council coffers looking decidedly unhealthy, The MJ and Norse Group brought together senior managers and chiefs with money on their mind to discuss what the current financial year has in store for the sector. Paul Marinko reports.

As if local government didn't have enough financial uncertainty already, this year brings the added crystal ball moment of a General Election. With council coffers looking decidedly unhealthy, The MJ and Norse Group brought together senior managers and chiefs with money on their mind to discuss what the current financial year has in store for the sector. Paul Marinko reports.

Somewhat predictably, it isn't long before someone mentions the only certainty for local government finances as assembled senior managers and chiefs settle in for a lunchtime round table discussion in the City of London. Barely have we began before one debater offers up a sobering truism.

‘Public finances are in a poor state,' they point out. ‘Whatever the outcome of the election this year there is no hope of us seeing a magic money tree appearing for local government or any other public services.

‘Local government needs to focus on the commercial activities which it can use to raise revenue, but also continue to press for the flexibilities that don't cost the Government a penny.'

While another voice around the table emphasises the need for all tiers of local government to work better together, another expresses frustration at the sector's ‘lukewarm' response to the offer of capital flexibilities from the Department for Levelling Up, Housing and Communities (DLUHC).

The ability to raise council tax further would solve many of the problems for district councils, according to one participant. But, for others, the challenges feel somewhat more insurmountable.

‘People are starting to realise that there are no more pennies to pinch,' says one voice. ‘Most services out there are at the baseline or just past the baseline.'

‘Actually, what's needed is for government to give us more money,' offers another.

‘It's a case of tin hats and hope the wider economy helps us out,' chips in a third.

And with several London boroughs represented around the table, the rapidly emerging top financial pressure of housing soaks up much of the oxygen.

One participant predicts pressures on council housing revenue accounts (HRA) could see some councils falling into section 114 territory.

‘The reason for the HRA coming into jeopardy now can be traced back to the period of hyperinflation,' states one senior officer.

‘Social rents were capped at 7.7% and that was done in a climate of increasing demand on HRAs in terms of the Building Safety Act, Fire Safety Act and the Decent Homes programme.

‘Essentially, if you benchmark social rents versus what many councils are paying the private sector they are artificially low and that is a direct subsidy to central government. Seventy per cent of our social housing tenants receive the housing element of Universal Credit

‘All we are doing by depressing rents is keeping the Government's benefits bill low.

‘If you delegated the responsibility to local authorities, you could start to have a housing system that responds to the housing crisis locally.' With the lid lifted on the housing genie, others lay in.

‘With Right to Buy (RtB) there's an absurdity in handing money back to the Treasury when there's a need for it locally due to the housing crisis in particular areas,' says one officer.

Another points to the campaign aimed at councils retaining 100% of RtB receipts. This, they claim, would provide five to six extra housing development sites in each area.

There is a clear frustration around the table at government's unwillingness to do more to help councils with their housing pressures.

‘For districts and unitaries, temporary accommodation is becoming as big a pressure as children's and adults' social care,' says one voice around the table.

‘Sometimes it feels – particularly in the housing space – that government interventions are set up to make you fail.'

And this is a particular frustration as it is evident all present are straining every sinew to find solutions to their monetary predicaments.

As one officer offers up: ‘Our focus is on inward investment and on developing a coherent approach to engaging with the investment sector and others

But another points out that the private sector is ‘getting nervous' about working with councils.

‘They don't really know what a s114 notice means and they are worried about if they are going to get paid.

‘There's a very careful comms piece by the public sector needed so we don't scare the horses.'

Elsewhere, there are concerns at the number of suppliers now coming in for contract tenders, with a consequent impact on quality of service.

‘How do we promise best service from a market that doesn't exist?' asks one debater.

And with councils looking to technology to deliver efficiencies and savings, there are plenty of concerns at the skills levels within councils. ‘Local authorities struggle to bring in the right talent and move the wrong talent away,' explains one officer.

‘The inability of other teams to go through change has meant our team has failed in other areas because we're focused on change management. We are starting to face the problem of people who can't do the basic things.'

Another participant puts this down to councils being unable to attract younger people because the sector no longer offers long-term career prospects and is therefore less attractive.

Bureaucracy is also identified as a turn off to new recruits, as well as a drain on the time of existing staff.

articular wrath is reserved for the bureaucracy attached to various individual pots of funding. And there is a clamour to return to a single pot for each council.

One officer, who revealed he was saddled with 36 sign-offs for different funding streams in just one day, says: ‘I just thought it was a real symbol of how we have managed to tie ourselves up. What a waste of money and what an industry we have created. Government has moved back to funding things but with much stricter requirements and much more focused pots, which has led to more bureaucracy. Instead of local choice over priorities it's very much directed from the centre.'

But if government does want to get involved there is a call around the table for it to do so in a beneficial way.

With concerns from some around the skills within local authorities to effectively partner with the private sector and great amounts of time spent by individual councils to develop contracts on systems and processes which are shared by all in the sector, the suggestion is that Whitehall step forward into this space.

‘Why doesn't government invest in products that we would all use, rather than each council going off and doing its own thing?' proposes one officer. ‘And in the IT space I don't think that's sensible.'

Another concurs by saying: ‘It's madness that we are all using different procurement tools when we are applying the same rules and approaches.

‘It should just be a simple system, because that is an area where you don't need something bespoke to an individual council.'

So, as the debate draws to a close, there feels to be a ray of hope piercing through the gloom of financial woe befalling the sector.

If the next Government can be encouraged to free up some tax-raising powers, delegate some authority over housing to councils and replace its financial micro-management with a touch of universal procurement support maybe some answers can be found.

Here's hoping!

Comment from Justin Galliford, chief executive, Norse Group

Following the announcement of the General Election in July, I look forward to hearing the plans of both major parties for local government, and I hope to see greater autonomy and a longer-term funding arrangement.

If, as is likely, we have a Labour Government, I believe there will be greater emphasis on insourcing services, which will present both challenges and opportunities.

And, as councils look to deliver services in-house, we will undoubtedly see increasing interest in the Local Authority Trading Company model, which offers greater flexibility and efficiency than the traditional Direct Labour Organisation set-up

I also feel that there will be more partnership working as local authorities seek synergies and buying power. Whatever the outcome we are in for an interesting few months.

Participants at The MJ / Norse round table:

Cagdas Canbolat, director of finance, Lambeth LBC

Ryan Devlin, director of strategy and communications, Lambeth LBC

Paul Clarke, director of finance, Islington LBC

Joe Garrod, strategic director of place, Waltham Forest LBC

Jonathan Martin, director of inward investment, Waltham Forest LBC

Adam Sargent, director of procurement, Waltham Forest LBC

Stuart McKellar, executive director, resources, Bracknell Forest Council

Ian Miller, chief executive, Wyre Forest DC

Justin Griggs, head of policy and communications, National Association of Local Councils

Justin Galliford, chief executive, Norse Group

Michael Burton, editorial director, The MJ (chair)

Kasia Brzeska-Reffell, head of local government sales, The MJ

Paul Marinko, deputy editor, The MJ (reporting)


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