The Spending Review: Priorities and Reality
What should be the Chancellor's priorities for local government in November's Spending Review - and what will the reality look like? LGE asks the experts.
Simon Parker, director, New Local Government Network
The priority for the Spending Review should be greater fiscal freedom for local government. At the moment, ministers are expecting local government to magically manage huge cuts and a slew of policy changes with one hand tied behind their back. If devolution is going to hand cities the responsibility for healthcare and skills then it must also give them at least some ability to decide what is spent on those services. Failing that, I would settle for at least some protection for social care budgets.
The reality is that this is very unlikely. The headline from the Spending Review will be another heavy wave of cuts, with devolution deals a questionable ray of light in an otherwise stormy fiscal sky.
Councils seem likely to come under pressure to spend down their reserves and dispose of assets to keep services staggering on to the end of the decade. With rising costs shrinking budgets, there is only so long that councils can innovate their way out of trouble. The Chancellor seems likely to set out an unsustainable financial settlement for local government, a problem with which his successors will have to wrestle.
Rob Whiteman, chief executive, Chartered Institute of Public Finance & Accountancy
As a profession, we encourage Government to focus on long-term delivery implications and outcomes to ensure that the spending changes made are sustainable.
The debate that is often portrayed as deficit reduction is avoiding the real debate that actually public spending will increase and the Government is making choices to fund some things at the expense of others. We need a more open and honest and informed debate on the challenges many public services are facing. There is a risk we make the savings that are politically acceptable rather than prioritise spending to achieve better outcomes. We really need a review of the whole system that looks at how all services connect, instead of concentrating on their individual cash flows.
By understanding the interconnectedness of services, politicians should then have an understanding of how cuts that make short-term savings in one area only intensify the pressures on others.
By breaking down the barriers between silos, politicians can then make sustainable long-term decisions that affect the future of our public services.
We urge the Government to take a holistic view of all public services, and avoid piecemeal reductions and cuts to unprotected budgets without also challenging populist tax and spending "giveaways".
James Maker, policy manager, County Councils Network
The Spending Review presents a number challenges for county local government. For me, the key priority for local government is securing the future of our social care system. Rightly, there has been an increasing focus on its fragility. Spending reductions have led to a tightening in eligibility for services, the withdrawal of discretionary services, and a significant, but unavoidable, squeeze on provider fees.
It is on the issue of provider fees, the introduction of a National Living Wage, and the sustainability of the social care market that the focus of the funding crisis has shifted in recent weeks. Since CCN published its groundbreaking research, County Care Markets: Care Market Sustainability & the Care Act, there is a growing acceptance across stakeholders that the residential and nursing care home sectors are facing unsustainable financial pressures.
The root cause of the pressures within local markets is substantially reduced funding forcing local authorities to pay lower and lower fees for care. This is leading to homes increasingly exiting the market or charging excessive fees to private users to stay afloat, with many service users unable to access good quality care.
Across the sector, there is a sense of acknowledgement that protecting health spending while failing to secure similar security for social care can impact on local health economies. There is a growing recognition of the potential consequences of further disproportionate cuts to social care budgets could have implications for the most vulnerable service users - and crucially lead to further pressures within the NHS through a lack of affordable care homes places and an escalation in delayed discharges. This is why CCN called in its Spending Review Submission for a ring-fenced social care budget, in return for a guaranteed real-terms increase in funding.
I believe the Department of Health is batting on the same side as local government to secure a fairer settlement for social care services. The challenge for the DoH and local government is now convincing the powers that be in the Treasury.
Graeme McDonald, director, Society of Local Authority Chief Executives
Only within a bold partnership can both Government deliver its long-term economic plan and local councils continue to fulfil their statutory responsibilities and achieve the ambitions of local communities. Working alone neither can succeed in their objectives, which will ultimately betray the trust of its communities. We all risk losing relevance.
The Spending Review therefore needs to be far more than a long-term budget settlement, welcome though a long-term settlement would be. The inequity between the health and social care systems needs to be addressed if the NHS is to survive, and provides an important opportunity for place-based budgeting.
Public investment also needs to be targeted where it is needed most, which implies local people making local decisions, and across the widest range of infrastructure, digital, skills, transport and housing.
Most of all, the Spending Review must be clear that devolution is not mere delegation. It should provide local people with the ability to create their own future, redesign their services and create a local state, accountable locally. Some areas may wish to pursue elements more quickly than others, but our economy cannot afford for regions to be left behind. We don't want to replace one imbalance with another.
All local communities want to be self-sufficient and while this will be difficult, with the freedom to work across local agencies, the ability to design funding distribution and incentive mechanisms, and to shape investment in local skills and infrastructure, we might just be part of creating the path to get there.
Cllr Ken Browse, chairman, National Association of Local Councils
The Spending Review gives the Chancellor a golden opportunity to put the local into devolution, ensuring decentralisation goes beyond the combined authority, county or district level with power and decision-making shifted down to parish and town (local) councils.
The Government will quite simply miss a trick if it overlooks the neighbourhood level and fails to put communities in control of their areas by empowering and strengthening local democracy, with improved links between local councils and devolution deals.
In order to do this, there are a number of measures the Chancellor should announce:
Firstly, fairer funding for local councils. Communities need certainty to plan and invest in their future, whether it's taking forward a neighbourhood plan, working with businesses to support the local economy or taking on new services from principal councils. George Osborne should rule out council tax referendums for larger local councils for the whole of the parliament, announce a round of business rate retention pilots, exempt public toilets from non-domestic rates and make sure community infrastructure levy and council tax support funding reaches local communities.
Secondly, strengthen local democracy. Simply help communities benefit from having a democratic structure for taking decisions and delivering services by further reforms to make it easier to set up parishes, including in devolution deal areas.
Finally, more powers for communities. This next phase of localism needs to empower local councils and enhance their powers to improve the economic and social vitality of their areas. The Government needs to bring forward plans to further incentivise and simplify neighbourhood planning, strengthen the general power of competence and reform local council red tape.
Paul Dossett, head of local government, Grant Thornton
In his March 2015 Budget, George Osborne set out plans to move public finances into surplus during 2019-20, which would include savings of £13bn from Government departments. Following his Summer Budget in July, the Treasury has been in consultation with Government departments to identify these savings. This has included "looking at transforming the approach to local government financing and further decentralisation of power, in order to maximise efficiency, local economic growth, and the integration of public services".
When the Chancellor rises to the dispatch box on 25 November to deliver the first Spending Review of this parliament we know that local government will again face significant funding reductions. The only issue for debate is the level and duration of continued austerity.
Earlier this month, the LGA set out in its Spending Review submission that local government will need to find an additional £10bn by 2020 to meet business-as-usual pressures and implement the Government's policy agenda. So how can the LGA's forecast be squared with further Government funding reductions?
It is clear that the Chancellor sees devolution as the key to public service reform, as well as driving economic growth. The majority of English local authorities were involved in devolution submissions made on 4 September, but it remains to be seen what the Chancellor's response is to these proposals. No doubt there will be some related announcements as part of the Spending Review, but many are likely to remain on the table well into 2016.
What is clear is that local authorities must take charge of their own destiny in order to radically reshape how they work with other organisations and their communities to deliver services and realise outcomes for their locality. Local authorities have been well led and have achieved significant savings and efficiencies in recent years. However, failure to plan a response to continued austerity, including leading on place-based public service transformation, will mean that some authorities will be facing a financial tipping point during the course of this parliament.