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Local government funding system ‘inconsistent and unstable’

The current funding system for local government is “inconsistent, unstable and uncertain”, according to senior finance officers from 36 local authorities.

They believe a new funding model is required that provides local government with more autonomy, places its financial stability in its own hands and addresses the dual needs of resource equalisation and incentivising growth.

The was reached at a roundtable event hosted by Grant Thornton. Attendees included Peter Bates, Cheshire East Council COO; John Betts, Warwickshire County Council head of corporate finance; Carol Culley, Manchester City Council assistant chief executive; and Mark Wynn, Cheshire West and Cheshire head of finance.

Concerns regarding the current system centred on increasing funding gaps in local government and how they could bridge them. Delegates were clear that even 'successful' authorities who had council tax, business rates and New Homes Bonus growth were struggling to meet the financial challenges.

Health and social care was identified as the most significant funding challenges for the English public sector, but delegates considered that local government was best equipped to meet this challenges if funded effectively. Combined authorities incorporating local government and health responsibilities, such as the model being put together in Greater Manchester, were seen as an effective long term solution to meeting these service and financial challenges.

Mark Stocks, director at Grant Thornton UK LLP, said: "The outcomes of this debate make it is clear that rapid change is necessary.  Though delegates recognised that economic growth is an effective mechanism for driving financial sustainability, they believe that it cannot be relied upon in isolation to create financial sustainability for individual councils."

The finance officers agreed that in the long term, more devolution of finance was needed to make this happen.  Devolution of tax raising powers for local government, control of council tax rates and banding, and retention of all business rates by combined authorities were considered as the most effective mechanism for creating a sustainable financial future for local government. 

Stocks added: "There is a growing call for devolution of finance in English local government. Pilot schemes have been agreed in Manchester and Cambridge. Other incentive mechanisms such as business rate pooling and Enterprise Zones are also available. Beyond this the pace of devolution and of delivery model developments such as combined authorities and shared services has varied. In reality, some areas have not changed while others have evolved significantly."

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