Will the 2018 Budget make a difference to local government?


by Rob Whiteman, CIPFA Chief Executive 

In 2008 Alistair Darling predicted in his Autumn Statement that it would take many years of cuts to get public finances back to health. Now, a decade later, Philip Hammond has declared an end to ten long years of fiscal retrenchment announcing a raft of spending decisions. But will the so-called ‘Phil-good’ Budget actually make any difference to the perilous financial position of local government?

Despite not inconsiderable injections of cash for social care of £650m, £45m for disabled facilities and £420m for potholes, I remain unconvinced. Unfortunately, these short-term spending decisions, however welcome, simply will not go far enough to put local authorities on a sustainable footing. If the government is truly committed to the sustainability of councils then it must be bolder, braver and think for the longer term.

Our latest Performance Tracker, produced jointly with the Institute for Government (IfG), hammers home the scale of the fiscal challenge facing local authorities. It highlighted how the significant spending pressures, along with rising demand in adult social care, of which we are all too well aware, have led to local authorities scaling back on activities, think culture and youth services, while steadily shifting the cost of services, like garden waste, onto individuals where they can.

These findings, along with other reports from the NAO and PAC that were released this summer, put serious question marks over the capacity of local authorities to weather the challenges that are on horizon. And, given the disconnect between diminishing resources and rising demand, the near impossible ambition of Business Rate Retention and the Fair Funding Review to bring about the necessary reform, the pace of the devolution agenda and the economic fallout of Brexit, there can be no doubt that a cold snap is on its way.

It is essential then the government use all the means at its disposal to ensure the sector does not buckle under the huge financial strain. The Hudson Review has helped outline what steps need to be taken towards much needed reform. As former Director General at HM Treasury, Andrew Hudson recommended that the Ministry for Housing, Communities and Local Government (MHCLG) focus on the deliverability of policy changes, make the settlement process more robust, ensure the skills of staff, improve communication with councils, and, something which we particularly welcome, have peer challenge and external scrutiny play a bigger role.  

Responding to the review, MHCLG has already implemented consistent settlement dates, and so we are optimistic that they will seek to introduce the rest of the recommendations. But it is imperative that the government does more. This must include issuing the long-awaited green paper on adult social care as soon as possible, reviewing the statutory requirements of councils, giving local authorities more clarity over Brexit, ensuring CFOs have a role on the top table and report to the chief executive, and they must fashion a more sustainable funding solution.

On the role of CFOs, the collective failure that led to the demise of Northamptonshire County Council shows how important it is that chief financial officers are supported and empowered to challenge organisational risks and to advise elected members and chief executives where they have concerns. Difficult advice must be welcomed and heard at the top table at all times, something which I fear is not happening at all councils especially where the 151 officer does not sit at the top table.

On fashioning a sustainable funding solution, rather than continuing to focus on how best to divide the funding pie up, we must instead look at how to increase the amount of resources available to councils and the only ways of doing so will be to continue rationing local services or to give councils fiscal powers to introduce local tax measures, such as tax on sales, tourism and other sources of income. Unfortunately, by reducing the tax take at a time that he should be looking to increase it, the Chancellor does not seem to understand that there is simply not enough cash to sustain the expectations of public services.

Our hope now rests on the ability of the Spending Review to plug the widening holes! But, as the Budget’s red book shows that spending by 2023 will fall far short of 2010/11 levels, I am not holding my breath.

This piece also appears on Municipal Journal's website.

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