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Real hope for realigning public services

Source: PSE June/July 2015

Graeme McDonald, director of Solace, discusses the opportunities and challenges in delivering self-sufficiency across the local government sector.

The Queen’s Speech has already signalled a significant change in pace in the reform of local public services. The Cities & Local Government Bill (more on page 67) has raised expectations across local government that local areas will be given the levers to instigate real change across their communities. There is real hope for the radical realigning of local public services. 

Meanwhile, the whole of the public sector remains under significant fiscal consolidation and cognisant of the fact that difficult choices will be required to eliminate the UK’s budget deficit. Continued financial restraint, coupled with many of the Bills already announced, will change the relationship between citizen and state, and the way in which public services are both delivered and held to account. 

Local government has already played a major role in meeting this spending challenge. During the current Parliament, local government has seen the largest reduction in revenue of any public service. Councils’ core grant from Whitehall has fallen by 40% and the Local Government Association is predicting a £12.4bn shortfall by 2020. It is clear that local government income will remain severely restricted for the foreseeable future. With councils’ ability to generate other income also severely restricted, it seems fair to argue that local government has more than shared in its part of the financial burden and that central government should now look elsewhere for significant cuts. 

However, local government recognises that its role goes well beyond delivering safe, efficient public services. Its democratic legitimacy coupled with the ability to influence and shape across organisational boundaries leaves it with a duty to look beyond the services it is directly responsible for and work with partners to drive down overall costs and deliver greater benefits to local communities. 

Solace believes that local government is now uniquely placed to develop a role as the convener of key public services, using the experience, management skills and innovation of the last five years to lead this change across the public sector. The financial challenges facing the country can only be solved by a step-change in productivity in the wider economy, matched by efficiency in the public sector, and local government is pivotally placed to achieve both. 

We would therefore argue that the upcoming Budget and Spending Review should build on the promising Queen’s Speech and start delivering specific key outcomes, including: 

  • Financial self-sufficiency across local government
  • Devolution of local state spending responsibilities to clusters of local councils to drive productivity across public services
  • Devolution to clusters of local councils to deliver greater local economic growth and productivity 

Self-sufficiency across the local government sector, in particular, is a challenging objective. The inequality of economic performance across the country means that both the residential and business-related tax base from which local services can draw their income is unevenly distributed. It will therefore take significant changes to redistribution mechanisms, inter-authority collaboration and growth incentives to ensure that self-sufficiency can be achieved. Making councils more ‘independent’ and less reliant on central government funding simply by cutting the revenue support grant is not uniformly sustainable and requires measures to temper its uneven impact if local services in areas hit the hardest are to not fail. 

Despite its difficulties, self-sufficiency is an important goal and should be a more explicit objective of this government. Decentralised decision-making improves efficiency and effectiveness, and in the long term saves the taxpayer money. But it also has a social dimension that increases the public’s opportunities to take an active role in the government and the decisions that affect their daily lives. 

Fiscal devolution frees the Treasury from the ‘liability’ of passing on significant proportions of its income to local councils and will consequently increase the accountability of local government to its own taxpayers. Devolution of local spending decisions in areas such as health, welfare and public sector assets will, through whole systems integration, the rationalisation of assets and processes, and more intelligent commissioning, improve public sector productivity and provide more effective and sustainable local services. 

The devolution of powers around skills, transport and other infrastructure will enable more responsive decision making across these areas that will better reflect the needs of local economies and develop a more balanced tax base across the country to in turn move local services towards greater self-sufficiency. These outcomes are all, therefore, mutually supportive and it will be important that progress is made early in this Parliament against all three if the full benefits are to be realised. 

The recent Queen’s Speech, and the appointment of a progressive secretary of state for communities and local government, sent out a positive message to the public sector beyond Whitehall. 

If this is coupled, through the Budget and Spending Review, with the radical reform of the way local services are budgeted and paid for, the government will not only be able to deliver its medium-term financial plan, but also place local services on a more accountable and sustainable long-term footing.

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