England & Wales Democracy, devolution and governance, Personal and organisational development

Viewpoint: Informing the reform process


The announcements and reforms are coming thick and fast from central government, Tom Lawrence takes a look at the landscape.

There are many common phrases to describe how things change or how they stay the same. “Evolution not revolution”, “May you live in interesting times” and “Plus ça change, plus c’est la même chose” are but three. All of these seem applicable in some way to the world of local government, particularly at the moment. Elements of the structure of local government predate the Norman conquest and the business rates system has its origins in the Elizabethan Poor Law of 1601. While both local government and business rates still exist, the way they operate has changed massively over the centuries.

Within my lifetime, local government has seen huge changes and there have also been big changes in how central government views it. In the 1980s, animosity to certain aspects of local government led to the abolition of the Greater London Council and the Metropolitan County Councils. At the end of the decade, the rating system was replaced by the Uniform Business Rate and the ill-fated Community Charge, soon itself replaced with Council Tax. The 1990s saw the introduction of unitary councils, which have become widespread. Councils were subject to rigorous assessment regimes.

In the first decade of this century, the major changes in local government finance were the creation of Dedicated Schools Grant and the prudential system for capital finance. Then under the last government, everything started to change again. Councils which had been used to steadily rising funding from central government suddenly found it slashed back. Ring-fenced funding, in particular, was almost done away with. Needs-based funding was largely replaced with incentive mechanisms, such as New Homes Bonus and Council Tax Freeze Grant. Formula Grant was replaced with Business Rate Retention and Settlement Funding Assessments. Public health was devolved to local government and the government started to reform Dedicated Schools Grant.

In the current Parliament, councils face severe cost pressures as a result of changing demographics, while government funding continues to be cut. As described in one of our briefings this week on income generation, to cope with this, councils will have to implement a wide range of approaches. These include generating income, investing in assets, early intervention and preventative services, working in partnership with other councils and organisations across the public private and third sectors, improving procurement and contract negotiation, and joining up services and reconfiguring them around the needs of service users.

At the same time, the government seems to be starting to view councils as key players in solving the country’s problems. The City Deals programme is being expanded into Devolution Deals and Combined Authorities are flavour of the month. Much of this seems to be driven by the Chancellor, flying in the face of the perceived wisdom that the Treasury is all-controlling and forever centralising. Ten days ago, the Chancellor announced that English local authorities will be moving towards 100 per cent business rate retention and Revenue Support Grant will be phased out. As noted by Jonathan Carr-West in his blog post, this announcement raises many questions. We don’t yet know which grants will be rolled in, how the grants in the Settlement Funding Assessment will be scaled back or what the distributional impact will be. We also don’t know whether the move to 100 per cent retention will be made in one go or phased in, whether the 2020 reset will go ahead, whether the tariff and top-up system will be retained or replaced with another form of equalisation, and whether changes will be made to the levy and safety net system. With regard to discounts and supplements to the multiplier, it’s not clear which changes will require new legislation or when this would be introduced.

With all these many, rapid changes, local government can only survive by learning from both its successes and its mistakes. This is where LGiU comes in – keeping you abreast of all of these many policy changes, including devolution and business rate reform. We will continue to do so, especially around this autumn’s crucial Spending Review. I’d urge you, as subscribers, also to keep us informed. If your authority or organisation has tried out an innovation like those described in our Policy in Practice briefings, please let us know. If your authority or organisation has found a particular aspect of one of our briefings helpful, for example, if it has influenced your response to a consultation, again please let us know. By keeping up this flow of information, we can help to ensure that local authorities emerge from this period of fiscal consolidation ready to thrive in the years ahead.

Tom Lawrence is a LGiU briefing associate.