England & Wales Democracy, devolution and governance, Finance

We need a new way of funding local government in England


Photo by Luis Villasmil on Unsplash

Last week, I gave evidence to the Commons’ Levelling up, Housing and Communities Committee inquiry into financial distress in local government. The LGIU is in a good place to talk about this, having spent recent months in conversation with our members about the situation that local authorities are dealing with right now and their hopes and fears for the future lay of the land.

The insight of our local authority members, along with the ongoing research of our Local Democracy Research Centre into local government finance and funding, provide powerful context for the recommendations that we will be publishing next month in our LGIU@40 Manifesto: For the future of local government.

We know how hard local government has been working over the last decade to find the savings that central government has demanded of it, while still providing the services that their communities rely on. As one local authority chief executive told me “we’ve spent the last ten years being as innovative as we can to stretch the elastic thinner and thinner and we’re getting to the point we can’t do that anymore.”

Our annual report into the State of Local Finance in England revealed earlier this year that only 14% of council finance leaders are confident in the sustainability of local government finance and 8.5% said they were anxious they would not be able to meet their statutory obligations. Our analysis suggests that this represents up to 23 councils at risk of a section 114 notice, strikingly similar to the Special Interest Group of Municipal Authorities predictions that 26 local authorities could issue a section 114 notice in the next two financial years.

There have been suggestions that, to some extent, section 114s can just be explained by mistakes made by councils. But the evidence doesn’t stack up. The local government finance system in England is broken, and yes, the places that make the worst decisions may well be the first to fall over, but they most definitely won’t be the last. The fact that mistakes are made in councils doesn’t mean there isn’t a systemic problem. There’s not enough money, it’s too short term and there’s not enough flexibility or revenue sources.

But structures can be fixed, things can be done differently, and indeed are in many other places around the world. The LGIU’s Local Democracy Research Centre, in partnership with academics from the University of Northumbria, has been exploring local government finance and systems in other countries. It is a unique study that is vital for generating new, evidence-based ideas for the urgently needed reform of the English system. By looking at other countries, we have come to see how dysfunctional the current system in England is by comparison and how it could be improved.

Finance is one of the core themes of the LGIU@40 campaign – along with trust and participation – and we have spent the past year collecting the views and insights of our members and carrying out original research and evidence gathering.

We have had a tremendous response to the LGIU@40 work from our members and the wider local government sector, with over 60 chief executives, leaders and senior figures taking part in interviews, roundtable discussions and making written contributions to the programme. Senior journalists from BBC and ITV News, Newsnight and the Financial Times have taken a keen interest in the insights and ideas garnered through this extensive engagement programme.

We will be discussing the results of this work at our first LGIU Members’ Research Symposium on the 6 December. Spaces are available for this complimentary event for senior officers and councillors from LGIU member councils exclusively on a first come, first served basis – find out more and how to book a place here.


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