Cllr Nick Rushton is the Leader of Leicestershire County Council and the finance spokesman for the County Councils Network.
We begin 2019 in the same vein that 2018 ended – with Brexit dominating the national discourse. With all the noise from Westminster, you would be forgiven for forgetting what a crucial year this is for local government.
As we enter what could be a defining moment for our sector, there is little doubt that councils start 2019 in a much better shape than we could have hoped for several months ago; with the government making a series of interventions last year to provide some new resources.
The County Councils Network (CCN) had clearly argued the need for the government to provide this resource, and these welcome announcements show that the current crop of ministers are acutely aware of the financial pressures upper-tier local authorities are facing. They are rightly listening to the pragmatic voice of Conservative county authorities.
The decision to be so vocal at a time of national instability has not been taken lightly. However, it reflects the reality of significant funding pressures for many upper-tier councils, eight years after necessary measures were taken to reduce the national deficit.
Local government has done more than any other part of the public sector to restore the national finances of this country; with councils facing a 40 per cent cut in their budgets from 2010 to 2015, with even sharper reductions in the following years.
Many, including my own authority, generated efficiencies by taking difficult decisions early and fast to protect services for the vulnerable and elderly, providing us with a platform to innovative and transform services, delivering more for less.
Counties have done everything that was asked by successive Conservative governments, delivering billions in savings to the Treasury, and using our reserves prudently to protect frontline services.
But with demand, particularly for care services, far outstripping a dwindling pot of funding, the positive news last year does not alter our long term financial challenges. Nor does it eradicate our concerns over how resources are currently distributed between councils. Therefore, this year’s spending and fair funding reviews are so important for county authorities across the country. They offer the opportunity to secure the required uplift in funding for all local government, to reform existing funding streams, and crucially, to ensure that funding for councils is distributed fairly to meet today’s real needs and secure value for money.
Counties suffer the most from the current system of funding councils that is unfair, outdated, and opaque. Much is made of counties’ higher council tax base, suggesting that this has given us an unfair advantage and shielded us from funding reductions. However, the reality is that residents in county shires are left to pay more for less, whilst subsidising services in other parts of the country. It cannot be fair that someone who owns a terraced home in Hinckley in Leicestershire is paying roughly double that of someone who owns a multi-million-pound dwelling in Westminster.
Counties’ “core spending power” – which includes council tax income – is £820 per person, smaller than metropolitan boroughs (£885), and far less than inner London’s ability to spend £1,044 on council services per resident. Moreover, the cut in government grants for counties over the last four years stands at a 42 per cent reduction – higher than anywhere else and almost double that of inner London (25 per cent).
No one is arguing for complete equality in funding, nor that council tax should be the same across the country. But the current system rewards higher spenders, while penalising lower spenders. It bakes in higher service levels, while failing to recognise unmet need. And it incentivises councils to have low council tax in exchange for more generous funding.
In addressing these fundamental flaws, we believe the government’s direction of travel is promising, and most importantly, justified. The latest consultation on the fair funding review outlines a simpler formula, more responsive to population levels and demographics. It contains important proposals to rectify our concerns that key services in shire counties, such as concessionary fares, local bus support and home-to-school transport, have been poorly funded compared to urban areas, while proposing a better methodology to recognise the increased costs of delivering services in rural areas.
And it sets out a fairer approach to considering local council tax levels in determining funding allocations, and rightly asks the question whether income from parking should be considered in calculating councils’ funding. But for all these positive developments, the adult social care and children’s services formulas remain somewhat of a ‘black-box’ with little detail so far on whether these formulae will genuinely respond to counties’ demographic and demand pressures across these services. This is concerning, with 65 per cent of counties’ expenditure in these two service areas.
Whatever these formulas do produce, securing additional resources at the Spending Review for adults and children’s social care will be essential. CCN has never been under the illusion that the fair funding review alone can solve the financial challenges facing local government. But neither are we arguing for a Conservative Treasury to offer us a blank cheque. More can be done to make services – and council structures – more efficient.
Reforming funding streams such as the community infrastructure levy and new homes bonus will help support sustainable housing development and ensure funding goes to the right councils to support growth and infrastructure. Giving councils more freedoms over local taxation will incentivise us to promote growth and take local accountable decisions.
Implementing 75 per cent business rates retention is an important start. But the spending review should go further by signalling more fiscal freedoms and the end to the council tax referendum policy if government wants councils to truly take back control of their financial destiny.
By implementing necessary reforms at the spending and fair funding reviews – balancing risk and reward with fair and sustainable funding – we need not only talk of survival, but of real ambition.
Properly-resourced county authorities can offer so much to the nation: growing our local economies in a post-Brexit landscape, genuinely integrating health services and re-shaping care, and ensuring that we not only build the homes the country desperately needs, but that we build sustainable communities with the necessary infrastructure following development.