It is no secret that local authorities in Britain have, over the last nine years or so, borne the brunt of financial cuts imposed by successive governments. Attempts made to tackle austerity, as well as policies designed to stabilise the UK economy, have impacted both on the money available to councils and the potential they hold themselves to raise revenue through local initiatives.
Concern for the financial health of local authorities is exacerbated when we also consider that local councils in Britain raise a mere 25% of their own revenue. Councils in Denmark, by contrast, generate 74% of their own income. In Sweden that figure is 84%.
A limited ability to raise money itself, therefore, combined with a shrinking pot of funding at Whitehall, means local government is not only severely restrained by limited financial resources, but also heavily reliant on the centre for its ability to function and carry out its statutory duties.
The financial struggles that all this generates has come to the fore recently as Surrey CC announced it will be holding a referendum on 4 May to canvass local public opinion in respect of a proposed 15% council tax increase.
At first glance, the referendum appears to be a consequence of the difficult position in which Surrey – and other councils across the country – find themselves. Cuts and limited money from the centre on the one hand, against an increasing need for social care on the other, mean the Kingston-based authority has little alternative but to seek money from somewhere.
Beyond a cry for more money, however, this situation also serves to highlight increasing tensions between Whitehall and local government.
A number of recent reforms and policies have appeared, on paper at least, to endow local authorities with increased powers: from neighbourhood planning and the running of community services, to public health functions and transport. Decentralisation was apparently at the heart of both the Big Society and the Northern Powerhouse initiatives. Concurrent cuts to local budgets, however, (as well as other centralising measures) have meant that, in reality, attempts to decentralise have fallen far short of stated promises and expectations.
Councils have limited power and autonomy, in part because they lack the financial resources to provide meaningful and innovative leadership to their given areas, but also because so much of what happens at the local level is directed from Whitehall. The social care issue in Surrey is an example of all this at work – an evident shortage of funds limiting the council's ability to provide the necessary degree of care gave rise to the proposed referendum.
Seeking further contributions from local people, however, is not necessarily the most practical solution to this issue and is unlikely to be constructive in easing tensions in the central/local relationship.
What is needed, therefore, is a fundamental rethink of the ways in which councils can generate revenue, as well as more careful management of existing financial contributions. Recalling that councils in Denmark and Sweden generate a substantial amount of their own revenue, it is food for thought to consider that a lot of that comes from income tax and charges for various services, as well as rents and leases.
With this in mind, increasing the opportunities through which councils can generate income would not only encourage redirection of existing public financial contributions, but also lessen the grasp that the centre retains over local government in Britain.
Dr John Stanton is senior lecturer at The City Law School
