England & Wales Communities and society, Democracy, devolution and governance, Economy and regeneration

The spending power of local authorities


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The IFS have released a comprehensive election briefing note today applying their usual rigorous analysis to spending reductions in local government.

Their core findings are that local government spending per person has fallen by 23.4% and that central government grants have fallen by 37.8% per person between 2009/10 and 2014/15.

Within these headline figures they find a huge degree of variation across the country with London Boroughs, the North East and the North West seeing the largest falls in per person spending.

Those councils with a larger proportion of their income from central government grants have unsurprisingly been harder hit than those with larger amounts of local revenue.

The service areas that saw the biggest drops in spending were planning and development, regulation and safety, housing, and transport.

Social care, for many councils the area of greatest demand pressure, has been protected more than other service areas but has still seen per capita spending reduced by 16.7%.

Further cuts planned for 2015/16 deepen these pressures.

For most people in the sector the findings of their research will be unsurprising but they add a level of precision and detail that we should welcome.

The question of course is what we do about them?

This research will add to the calls for reform of the local government finance system and CIPFA and the LGA have both reiterated this today.

I still worry however that we are not nearly ambitious enough when we talk about reform. We know that the system is fundamentally broken but we continue to tweak around the edges rather than fundamentally reforming it.

There’s a lot we could do: letting councils set business rates; letting councils vary the top and bottom rates of income tax; local taxes; regional tax competition; removing borrowing restrictions; creating genuine single budgets that go across the whole of public services in an area, not just the bits under local government control.

In the UK context this sounds like a radical list but they are all things that work in other parts of the world and that we don’t even talk about here, or we are only beginning to talk about.

We increasingly recognise that we can only meet the big social, political, cultural and economic challenges of our future by having locally designed services that are wrapped around the needs of local people, that understand local conditions, that are adaptable and flexible. And yet we still live in a country in which 98% of tax is determined by one person, and in which 80% of spending is controlled by central government.

And when we start talking about local government finance we all understand that it’s broken. We don’t think it’s fit for purpose. It doesn’t work. But when we talk about reform we start fiddling around the edges. And I worry that fiddling at the edges actually is equivalent to fiddling while Rome burns. We have a system in which we need local government more than ever, we need local government to help us face the challenges of the 21st century, but we are tying both hands behind its back by giving it a finance system that fundamentally doesn’t meet its needs.