England & Wales Democracy, devolution and governance

Local government needs clarity

It’s hard to remember the time when local government last went into a general election with so little clarity about its future, writes Lauren Lucas. And the results have hardly illuminated the situation. With the failure of any party to win an absolute majority at such a crucial time in the Brexit negotiations, it would not be extravagant to say the future of the country hangs in the balance.

This creates a very difficult situation for local government, which is desperately in need of some clear direction in a number of key policy areas. The announcement of the election in April placed several important decisions on hold, while the campaign itself has thrown others into confusion. The funding of local government, plans for devolution and delivery of adult social care are all in dire need of a national direction.

Local government is rarely front and centre of a new government’s priorities. With the looming Brexit negotiations and a fragile economy to be managed by what is likely to be a minority administration it would be easy for the new leadership to dismiss these decisions as a sideshow. But this would be a mistake. All indications suggest we’re in for a rocky ride over the next few years and in the absence of a strong national government, local government will be essential in ensuring communities work, local economies grow, people are housed and cared for and infrastructure is delivered. It cannot do that from a position of uncertainty.

Here are the top three issues local authorities will be looking to the new government to address.

Will business rates devolution go ahead? Councils currently have very little certainty as to how they will be funded beyond 2020. The ability to retain 100% of business rate growth in an area was to replace the Revenue Support Grant (RSG) councils received from central government, but progress on local government finance has been complicated and slow. In our annual State of Local Government Finance survey, nearly 80 per cent of respondents said they had ‘little or no’ confidence in the sustainability of local finance, while over 80 per cent said the current needs assessment formula is not fit for purpose. With the fall of the Finance Bill, which contained the proposals for business rate devolution, the future of local government finance is even more unsettled.

The new administration must decide quickly if they are committed to the bill in its current form, and if it can be passed. What’s clear is that using business rates growth to fund local services is controversial and will create winners and losers: we would like to see a rethink about how we broaden the local tax base to create a sustainable way of funding services in the long-term. More creative approaches to fiscal devolution were ruled out of the initial round of devolution talks: it’s time to revisit them. If business rate devolution does not proceed, then an alternative model must be established to provide some level of stability in the sector.

What next for devolution? The devolution programme was very much George Osborne’s creation, and under the previous administration was championed strongly by Greg Clark as Secretary of State for Communities and Local Government. Since the last administration took office, the focus has inevitably shifted towards Brexit and the impetus behind devolution has slowed.

The existing (largely metropolitan) devolution bids have continued to move forwards with the election of six new metro-mayors in May, but the rural two-tier devolution model appears to have foundered. In several two-tier areas, a shuffle towards reorganisation has replaced devolution talks, with places like Hampshire, Buckinghamshire and Oxfordshire putting forward – sometimes competing – bids for reorganisation. Like the devolution deals, there has been very little in the way of open coordination from DCLG and the announcement of the general election has paused decision making on the future of these areas.

With this in mind, the future of devolution depends largely on who is selected as the next Chancellor and Secretary of State for DCLG. If devolution is abandoned in the wake of Brexit negotiations and a hung parliament it will leave local government more fragmented than ever. Retrospectively, it may be seen as one of the biggest missed opportunities in the history of local governance and whoever becomes Secretary of State needs to provide clear leadership on devolution and on reorganisation.

How do we address the challenge of social care? The already murky waters of social care funding have been further darkened by a series of controversial manifesto pledges and electioneering. The Conservative Party manifesto originally committed to including the value of the family home in the means test for home care eligibility, with a guarantee that no individual’s assets would be depleted below £100,000. There would be no upper limit on an individual’s care spending. This amounted to a scrapping of previous plans based on Andrew Dilnot’s 2011 review, which included a cap of £72k on any individual’s contribution to their care costs and which were due to come into effect in 2020.

After a few days of intense criticism, Theresa May announced a U-turn on the policy, explaining that there would be an upper cap on care costs after all, leaving the future of the adult social care system ambiguous. Meanwhile both the Labour and Liberal Democrat manifestos committed additional resources for social care. What is absolutely certain is that it cannot go on as it is. According to the LGA, social care faces a £2.6bn funding gap by 2020, and our most recent report on social care, Paying For It, illustrates how the social care ecosystem is crumbling because of a lack of investment. Unless this crisis is given immediate priority, the system will continue to fall apart, leaving vulnerable people in need of support.

All these issues were urgent before the announcement of a general election pressed the pause button on the business of government: they have only become more urgent over the intervening weeks.

Local government may not usually be at the top of a new government’s ‘to do’ list, but in the absence of a strong central administration, it will be an important partner in meeting the challenges we face as a society over the next few years. Weakness in a national government will make strong leadership at a regional and local level ever more important. We are in a period of almost unprecedented levels of uncertainty about the future of the sector – and of the country as a whole. Time to put councils back on the agenda.

Read LGiU Chief Executive Jonathan Carr-West’s statement on the General Election results.

Lauren Lucas is LGiU’s Head of Projects.