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Finding the funding

Adam Hewitt reports from a local government finance session at the LGA conference 2012, involving Simon Ridley, director of local government finance at the Department for Communities and Local Government; Birmingham City Council chief executive Stephen Hughes; Cornwall Council’s Cllr Julian German; leader of Stevenage Borough Council and member of the LGA finance task group Cllr Sharon Taylor; and David Smith, director of resources at Kirklees Council.

During a session on council finances at the LGA conference – called ‘Surviving the squeeze: getting to a sustainable settlement for local government’ – Birmingham City Council’s chief executive Stephen Hughes (pictured above) spoke out strongly against the Government allowing local authorities to keep only half of business rates income.

Hughes said: “Given the [Coalition’s] key policy objective is to radically devolve to local government and give us incentives, you’d have thought therefore that they would have given us 100% of the business rates.

“They have given us 50%, and that’s taken away too much, so they’ve had to reinvent RSG [the revenue support grant settlement] to give us back some of the money they have just taken off us.

“Their own impact assessment shows that the bigger the proportion that we keep, the bigger the impact on growth – so they’ve compromised both their localisation agenda and their growth agenda in order that central government departments can keep their grip on local government.”

Stevenage Borough Council leader Cllr Sharon Taylor, who sits on the LGA’s finance task group, deplored the “punishing cuts” being inflicted on councils and said “a funding car crash is on its way”. She criticised a “CLG team that has done nothing to protect local government spending”.

She said the Government needed to cut back on the 1,300 statutory duties that local government must perform, and again highlighted how rising demand in social care and waste management, together with debt interest payments and concessionary bus pass costs, would leave many councils with virtually no cash to spend on anything else in just a few years’ time.

Ridley himself said the cuts had to be put in the wider context of all government spending, which had to be cut back due to falling output across the economy, and said the business rates plan was just one of many pro-growth measures being taken, alongside enterprise zones, the regional growth fund and so on.

Others said cities like Liverpool would suffer disproportionately under the business rates policy, but Ridley said the policy is more redistributive than its critics realise.

LGA chairman Sir Merrick Cockell has previously said the business rates proposals fall “well short” of what was hoped for.

David Smith, director of resources at Kirklees, spoke of the need to balance universal and targeted services in a harsher budget environment, but noted that, for some authorities, the business rates scheme would not prove a positive. He said: “It’s very difficult for us to replicate the kind of growth that’s been seen in some authorities elsewhere in the country,” adding: “Prosperity, through the grant system, has been shared out in the past – and won’t be shared in the future.”

Session chairman Cllr Julian German, from Cornwall Council, said it was the first to set a budget in 2010, choosing to cut “early and deep” to prepare for the future, rather than relying on reserves. Things are only going to get tougher, he said: “We know there will be difficult decisions, but the reality is that just cutting back on spending isn’t the answer. Yes we need to reduce our cost base, but we need to invest in the right areas, such as using capital investment to create growth, creating a virtuous circle, increasing the amount of business rates collected.”

He was one of many people at the conference to reference the ‘Barnet graph of doom’ (pictured) – a stark visual representation of the fact that without major changes to local government finance, shrinking budgets plus an ageing population means that in a decade’s time councils will have no money for anything but social care and children’s services.

He said: “We all know about the graph of doom, but what are the solutions?”

Virtually every council has been undergoing some kind of transformation programme to try to get better value for money out of the services they do still deliver: but without social care funding reform, it will all be for nothing. There have been few firm answers so far.

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