27.11.15
'Local government continues to bear its share of public sector constraint'
The impact this week’s Spending Review will have on key council partners will be “critical to evaluate”, but what remains clear is that local government continues to bear its share of public sector constraint, according to Solace.
Mike Suarez, chief executive of Cheshire East Council and Solace deputy spokesperson on Local Government Finance, said in a blog that while the devil is in the detail there are a number of interesting dynamics emerging.
For instance, intersection of the grant funding system and business rates means that the government commitment to business rate localisation can be delivered. “The issues of redistribution I’ll set aside for another time,” he added.
Additionally, Suarez said the council tax precept for social care “at least explicitly recognises the structural significance of a maturing population”, irrespective of whether it covers the pressures locally.
“It is an important and strategic matter which helps to raise the profile of this issue that affects all major economies,” he noted.
“There is an opportunity, too, for some authorities to consider how to sustain their funding locally into the medium term and begin the strategic analysis of how their income streams of business rates, council tax and other revenues will meet and underpin their community priorities.
“Ideally, better news for one public partner could ultimately be better news for all.”
Paul Dossett, head of local government at Grant Thornton UK LLP and a regular contributor to PSE, added that the chancellor’s Spending Review confirmed the scale of the funding reductions being faced by local government over the life of this Parliament, with plans to phase out all the block revenue grant by 2020.
“He [the chancellor] also announced that councils will be spending in 2019-20 the same in cash terms as they are currently. There remain many significant 'ifs' to determine if this scenario will be achievable,” said Dossett.
“The most significant announcement is that the main central government revenue grant to local government will be phased out completely by 2020. This will leave council tax and business rates as the main source of local government revenue finance, but both retain significant central control.”
He did warn that over recent years local authorities have been well led, but failure to further shape their future and work within the opportunities and threats in which they find themselves, will mean that some authorities could face a “financial tipping point” during the course of this Parliament.
Ahead of the Spending Review, Mark Lloyd, the new CEO of the Local Government Association, told PSE that the reality for councils is the workforce capacity will reduce further in the next five years and that there will be service reductions.