England & Wales Democracy, devolution and governance, Finance

The year ahead


Photo Credit: shinealight via Compfight cc

This year is going to be tough for the public sector – local government perhaps in particular – but that’s not anything new.

What is different? We are already seeing a pre election mood among the media and in Westminster. The current hot issues – like migration, welfare and the cost of living – aren’t going away any time yet. We can expect more heated debate and counter debate. A difficult environment for all councils that need to implement reform and deal with the fall out. And the pressures from local campaign groups will increase. Democracy is no longer just played out at Westminster and in the town hall – social media and new technology are increasingly important to the debate locally and nationally.

Finance is, however, the biggest concern for many councils. Will Eric Pickles carry out his threat to take action against councils that have consistently imposed increases just under the current threshold of two per cent? Or reduce the amount by which councils can increase council tax without seeking approval from residents to 1.5 per cent? The Guardian claims, though, that Theresa May has warned in (leaked) cabinet exchanges that police forces needed greater flexibility in funding or they would suffer cuts that could endanger services, so maybe these rumours may come to nothing.

But the other budget pressures faced by many councils will not disappear any time soon. The Autumn Statement was not particularly bad news for local authorities, but local government has already taken a disproportionate share of cuts, with ten per cent further cuts planned for 2015-16 as announced in the June spending review. George Osborne has also said that the Conservatives would want to see £25 billion of more cuts if they win the general election. The main argument so far is what share of this would be welfare cuts and where in the welfare budget they would come from? Would a Labour government or a coalition one make the same level and type of cuts?

How can local government deal with this? Grant Thornton’s third year of their financial health checks of English local authorities makes interesting reading. Guy Clifton, national value for money lead at the company, had this to say in Public Finance:

“The sector has continued to show great resilience and focus, and we found that most councils had successfully delivered their 2012/13 budgets and were confident of delivering throughout 2013/14”.

But he also says that “some key indicators of financial performance are experiencing a worsening trend, with liquidity, performance against budget, reserve balances and sickness absence an increasing risk for some councils….It is not clear that all local authorities have the relevant strategic financial planning skills – both in the finance community and in services – required to successfully navigate the medium term. It is also critical that elected members have the appropriate skills, experience and support to appropriately scrutinise financial plans, budgets and savings programmes”.

They stress the critical need to generate additional sources of revenue income as government grant continues to fall; to accelerate the use of alternative delivery models with public, private and third sector partners to help drive efficiencies; to ensure local government is at the heart of developing housing opportunities for its communities; and to work closely with Local Enterprise Partnerships to support effective and sustained projects. Council leaders would no doubt echo this message – though some would question the ever increasing use of alternative delivery models and would be critical of how the government’s incentives for growth, like the New Homes Bonus, are working. Most would also say that even with local government continuing to be innovative and forward thinking, the financial cuts are unsustainable, and that central government has to recognise that councils need further flexibilities, incentives and greater freedom to raise money locally.

Many councils are questioning their role and what they do – with some suggesting non statutory services will be increasingly at risk and others looking to residents and community groups to take over more services. The national debate over public service reform, though rather quiet lately, will presumably re-emerge as the general election gets nearer.

There have been positive developments – the bedding in of the community budgets approach for example and the establishment of the Better Care Fund, which, though not providing desperately needed additional funding, should lead to greater health and social care integration.

This year should see the emergence of health and wellbeing boards as significant players; how they are seen to take a leading role across health, social care and public health locally will be crucial for their credibility and strengthened role in the future. The transfer of many public health functions to local government will be a year old in April, and again councils need to show that the transition phase is over and the new regime is making a real difference to localities.

What else will be significant for local government in 2014? There are key local elections on 22 May; the Scottish referendum on 18 September (with the spotlight on devolution and powers having implications for local government in England and Wales, whatever the outcome); and the budget on 19 March. Each month will see the debates in the run up to the 2015 general election becoming more intense. The political parties will be pushing out new policies and promises: we will be monitoring them from the perspective of local government. Watch out for our briefing shortly on the Liberal Democrats that follows on from one last year on Labour.