Short-termism has a human cost


By Rob Whiteman, CIPFA CEO

We have a tough year ahead. With the initial shock of the pandemic behind us, we must move forward with preparations for the future. At CIPFA, we have made it known that while we think the one-year spending review is an appropriate way to combat the shockwaves that COVID-19 has sent through the sector, we must do everything we can to permanently switch to longer term planning in a post-COVID world.

At this point, you would usually expect us to focus on medium and long-term financial planning. But we can’t forget about the human cost at the heart of this pandemic. It’s easy to get stuck on balancing the books without fully realising the impact that short-termism and poor financial planning has on the lives of people in the communities we serve.

People are suffering. Local businesses are suffering. Unemployment is at its highest, and the impacts of this pandemic will continue to be felt for years to come. We recognise just how hard and effectively councils have worked to tackle the pandemic. Organisations and people are tired – but it’s not all about COVID-19. 

If COVID-19 has taught us anything, it’s that short-termism is a fundamentally flawed and risky way of managing public money. In the near future, we expect to see councils draw on their reserves to make up for the income from council taxes and business rates that has been lost.

When risk goes up, the level of reserves should go up as well. COVID-19 has proven that we can’t predict the next time we will face an unprecedented crisis. It’s crucial that local authorities maintain high enough levels of reserves based on the amount of risk they will have to manage.

Medium-term problems, like the pandemic, need medium-term solutions. Naturally, short-term measures tend to help in the short term, but generally cause greater problems in the long run. We can look to the example of Croydon issuing an s114 notice earlier this month as an example of this. Our 2019 Resilience Index showed that they already had low levels of reserves that were not enough to combat the risks they faced.

Aside from Croydon, the pandemic has left many local authorities unable to envisage how they will make it through the next two to three months, let alone the next two to three years. But COVID isn’t to blame for all of these problems. Some councils have made poor decisions that had nothing to do with austerity or the current public health crisis.

The coming decade will be the most difficult the sector has ever faced – with significant weight being placed on the upcoming comprehensive spending review on 25 November. All evidence points to the fact that this will be a tough one for local government. We are now reaching a moment in time where councils may have to choose which vital public services they will be able to fund and which ones they won’t. These are difficult choices to make - but will be inevitable if we continue down the same path.

The more money that is allocated for and pooled by local government for local decision making, the better. All funding that is available should be put on the table to allow for better local government prioritisation.

Looking ahead to the medium term, we need reform and a wider tax raising system. Ideally, some of the additional reforms that we’d be looking at will be in the areas of climate change, sustainability, upskilling and the levelling-up agenda. We need to focus on what roles councils will play in creating growth in their local communities moving forward.

Officers on the ground are already working together to create and implement the best solutions they can for local problems, we just need central government to catch up. Local communities know what is best for their areas. Giving them the ability to make more of their own decisions will ensure that lives are saved, and precautions are in place in the event of future crises.

We must take the lessons of COVID-19 to and apply them to how we manage risks and plan adequately for the future. If not, there will be a significant human cost. Protecting the livelihoods of the most vulnerable people in our communities should be at the heart of all decision making.

This article first appeared in Local Government Chronicle.

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