david rees | local government News | 12 MAY 2015
With a confirmed Conservative majority in Westminster and the democratic fate of 279 councils decided, 2015 will be a key year for local government.
Despite accounting for approximately 25% of public expenditure, local government did not feature prominently in the election campaign. This might be a sign of its success. Local Government Association figures suggest councils have seen a reduction of over 40% in central funding since 2010.
Yet, according to a recent Ipsos MORI's poll for BBC News, more people think that local government acts in their best interests than Westminster or Brussels.
So what can councils expect from the new government? The Conservative manifesto promised a continuation of many of the coalition’s policies. This includes local government having, 'far reaching powers' over economic development, transportation and social care as part of wider devolution plans.
Improved local flexibility will be provided through further reductions in ring-fencing and removal of 'Whitehall burdens'. The most obvious example of this will be the further integration of health and social care through the models seen in Greater Manchester.
It is also clear that the sector will face continued or increased reductions in funding and that will present significant new challenges. PA Consulting’s recent research, and snap poll of senior officers, suggests that funding reductions, to date, have been dealt with through either transformation or service efficiencies.
Hampshire County Council fundamentally redesigned its telecare services, reducing costs by £800,000 and improving outcomes. Basildon Council took the service efficiency route and secured a 50% reduction in customer service costs through new ways of working and adoption of new technology. Fewer councils have made direct reductions in services and those that have taken this approach have encountered significant public hostility.
It is clear that the position will become more difficult in future funding settlements. Our survey showed that 57% of respondents anticipated failure in certain preventative services (which are discretionary) by 2016/17 if funding reductions continue at the same rate as the past five years. If budgets are maintained at current levels, in real terms, this failure is deferred until 2017/18.
The problem is that cutting these types of preventative services not only adversely affects the service user, but results in poor value for money for local authorities and wider public sector. For example, reducing services such as falls prevention means that fewer elderly people stay mobile, increasing the burden on adult social care budgets or on A&E.
The problem could get even worse. One respondent anticipated that by 2017/18 statutory services (such as adult social care provision and waste disposal) could fail if funding continued to be eroded. That was a particularly pessimistic view but half of the respondents suggested it was likely that services would fail by 2019/20 at the latest. By maintaining funding at current levels, in real terms, this service failure would be delayed by a year.
This should not be misinterpreted as a plea for additional government funding. Although increased financial support would be welcomed, when asked to rank various interventions in order of impact and importance, access to central government transformation funds was placed last.
However, there are a number of measures that could help local authorities manage funding reductions. These include introducing multi-year financial settlements which would provide increased certainty and enable more fundamental changes to services. It would also help to address the concerns over the extent of local authority reserves. As the National Audit Office recently highlighted, approximately 80% of councils increased their reserves between 2010-11 and 2013-14, and it seems clear that much of this is a response to the uncertainty about future funding.
The momentum should also be maintained on increasing local fiscal powers. Changes to Business Rate retention need to go beyond the 2012 changes, and the pilots in Cambridgeshire, Greater Manchester and Cheshire East, to achieve the manifesto commitment to 100% business rates growth retention. The removal of the council tax cap could also allow authorities to manage in more efficiently for the longer term. While setting local taxes according to local demand could create accusations of a post code lottery it could also be seen as true localism.
A longer term review of local government funding is needed to address 'cost shunting' in the wider public sector, especially in areas like adult social care where pressure on NHS services tends to result in increased demand on council services. A review should also look to develop a system which allocates funding and budget reductions more equitably across different geographical areas.
Although local government did not feature strongly in the election campaign, it will be high on the future political agenda. It is important to many people that it works well and it needs the structures, freedom and support to ensure it can provide value for money services in a sustainable way in the future.
David Rees is head of local government services at PA Consulting Group