Roundtable: Autumn Statement aftermath
The Autumn Statement and Spending Review included a number of major announcements for local government, including the phasing out of the block grant, full retention of business rates, a new two per cent council tax precept to fund social care, an extra £1.5bn for the Better Care Fund and a target of delivering 400,000 affordable homes. Does this mark a fundamental change for local government? LGE asks the experts.
Lord Porter, chairman, Local Government Association
The Spending Review has handed down a difficult £4.1bn funding cut over this Spending Review period for our residents and comes on top of almost £10bn in further demand-led cost pressures facing councils by the end of the decade. The consequences for our local communities who will suffer as a result should not be underestimated.
Even if councils stopped filling in potholes, maintaining parks, closed all children's centres, libraries, museums and leisure centres and turned off every street light, they will not have saved enough money to plug the financial black hole they face by 2020.
These local services which people cherish will have to be drastically scaled back or lost altogether as councils are increasingly forced to do more with less and protect life and death services, such as caring for the elderly and protecting children, already buckling under growing demand.
Allowing local government to retain 100 per cent of their business rates income will help councils try to mitigate some of the pressure they face following further funding cuts. While it is positive that the Treasury has worked with us to localise business rates, this is just the start of the journey.
Simon Parker, director, New Local Government Network
George Osborne has set out a Spending Review for balancing the nation's books, but his plans for deep council cuts show he is in denial about the challenges Britain's demographics pose to hard-pressed social care departments.
While giving councils the ability to make a two per cent council tax increase is a lot better than nothing, it comes nowhere near to solving the problem.
In poorer parts of the country, such a raise could generate as little as £500,000, which is not enough to cover planned increases in the National Living Wage, let alone fill the service provision gap caused by cuts. This is a drop in the wrong ocean.
With the number of over-85s projected to increase by nearly 20 per cent by 2020, it makes no sense to ask already-squeezed local authorities to bear such a large share of deficit reduction. There is a danger that we are simply storing up spending pressures for the future.
The Chancellor's short-termism means cutting critical budgets that support local economic prosperity.
Paul Dossett, head of local government, Grant Thornton UK
The most significant announcement is that the main central government revenue grant to local government will be phased out completely by 2020. This will leave council tax and business rates as the main source of local government revenue finance, but both retain significant central control. For example, for a local authority to increase the council tax above two per cent requires local electors to vote in favour and business rates can only be increased by a democratically elected mayor of a combined authority, of which none exist at present.
It's a fallacy to assume that local authorities can use reserves to help absorb the removal of the block revenue grant because they can't be used in a recurring way - they can never prop up baseline revenue budgets in lieu of Government funding reductions. They can only be used as a one-off contribution to revenue spending and do not provide a sustainable solution to maintaining local authority services.
However, greater scrutiny of how reserves are being used should be an important area of focus for members. Local authorities have been acting responsibly in the use of reserves, particularly given uncertainties over future central government funding reductions, and the Chancellor does not seem to appreciate the irony of criticising the last Labour government for 'not saving for a rainy day' when accusing local authorities of doing just that with their use of reserves.
Paul Bradbury, group business development director, Civica
As suspected, there was a lot of talk around digital solutions, with the major announcement being that the Government Digital Service (GDS) will receive £450m to assist our authorities as they strive to deliver more digital and integrated services to meet the public's needs.
From our recent report, The Changing Landscape for Local Government, it is evident that new technology implementations are needed to drive efficiency savings. We found that 43 per cent of council leaders and chief executives believe that using technology to encourage citizens to self-serve will be a key priority by 2025 - the investment in GDS needs to focus on making this a reality.
Andrew Jepp, director of public sector, Zurich Municipal
While the Chancellor has thrown councils a bone by allowing them to levy an additional two per cent to fund health and social care integration, abolishing the uniform business rate and giving councils the revenues, and creating new Enterprise Zones, the financial pressures continue to be immense. Local authorities can't go bankrupt, but they can financially fail and the risk of this happening has been increased.
Paradoxically, the financial pressures themselves aren't the biggest problem facing councils. Most councils are having to step into the unknown to become 'Council-preneurs' and have had to embrace risk in a manner like never before. This increases the potential for some of these risks to materialise, with significant consequences that will only increase future pressure. We would urge all local authorities to ensure that they have robust plans in place to minimise and mitigate the risks of the change agenda.
Shirley Cramer CBE, chief executive, Royal Society for Public Health
By giving to the NHS frontline with one hand while taking away from public health measures with the other, the Government is securing the short-term stability of the health service while selling its long-term sustainability down the river. With acute care at the top of the pile, struggling primary care in the middle and public health relegated to the bottom, health funding is travelling in the wrong direction.
We also know that the most deprived areas suffer from the greatest public health problems and local authorities in these areas need the most support to address them. And yet these authorities stand to recoup the least from business rates. If the proposed new funding arrangement for public health is implemented, we may end up with a perverse situation where those who need the most are given the least.
Mike Turley, UK and global head of public sector, Deloitte
The public are likely to see much more noticeable changes in their public services in this parliament than they did in the last.
A lot of responsibility for funding services such as social care, councils and police is being pushed down to the local level - a lot of public servants across the country will be scratching their heads about the combined impact of these changes. In many cases, extra funds may be insufficient to deal with the level of challenges public services face. For example, the ability of local authorities to raise an additional £2bn for social care by increasing council tax by two per cent is only a third of the forecast demand and predicted deficit in social care by 2020. More money is not, in itself, the silver bullet.
Two new and significant funding formulas for local government and education have been announced, but both are silent on how they would deal with financial failure.
Melanie Leech, chief executive, British Property Federation
While there are some really sensible suggestions in the Autumn Statement, the planning system still has one big problem - the lack of resources in local authority planning departments. Both the private and public sector have identified this as one of the biggest obstacles for development, and with the private sector willing to discuss how it might be able to plug the funding gap, it is frustrating that Government has not engaged on this matter.
Local Plans are the key to sustainable development, and the new test to ensure delivery against the number of homes set out in them is a welcome move that will ensure that local authorities really do concentrate on growth for their area and that their Local Plans are focused on delivery and the practicalities of housing the population.
If authorities can keep their Local Plans kept short and sharp, they will help themselves.
A lot of disagreement between local authorities and developers arise due to viability assessments, and so the move towards a standardised viability model should go a long way to solving some of the disputes around development. It is an enormously important step and we are delighted to see it taken forward.
The model must be sure to take into account the needs of the Build to Rent sector as well as the more traditional development approaches.
Tiffany Cloynes, head of public services (England), Geldards
The effect of the devolution agenda together with the end of the block grant represent whole-scale change, not only in local authority finance but in the way local government will function in the years to come.
From 2020, council tax and business rates will be the main staple source of local government finance.
Although local authorities will be able to retain 100 per cent of receipts from future land sales, clearly these payments are one-off (more perhaps with overage depending on the terms of disposal) but not regular payments. These receipts may need to be used in part, for example, to contribute to a fund that can be used to create a regular income stream to help defray ever-increasing service costs.
The ability to retain rates from 2020 (and to levy additional council tax, subject to vote if over two per cent) may also assist. The challenge will be for local authorities to use devolution, their new powers and combined structures to enable the finance pot to be sufficient to enable recycling and reinvestment.
The Chancellor's announcements clearly signal a greater role for local councils and their partners in enabling local government to be financially fit for the future. But with empowerment will come greater responsibilities; is local government up for the challenge?