Making the UK more financially autonomous at the local government level could have a huge range of benefits, says Solace’s spokesperson for local government finance Patrick Melia – and there are a range of options available.
Patrick Melia
While we have got a new government and encouraging signs of a more mature relationship between the centre and local councils, the bigger picture on public and local government finances has not changed. If anything, it has got worse after the chancellor recently revealed £22bn of unfunded pressures.
As a result, all government departments, including the Ministry of Housing, Communities, and Local Government, are being asked to find £3bn savings as well as reduce back office costs by 2%. All of this will inevitably impact on what councils can expect to receive at the forthcoming Budget and Spending Review.
And yet real terms funding cuts, allied to demand pressures and increased costs, mean that the sector faces a funding gap of £2.3bn in 2025/26 and £3.9bn in 2026/27 just to maintain services at their current levels. While it would be naïve to think, given the context, that the government will make an exception for councils and plug those funding gaps, the promise of a multi-year funding settlement – by far and away the top request among officers when we surveyed our members – will mean that local authorities can better plan for, and therefore navigate, the future.
This is important because it is clear that many of the biggest problems facing our communities – widening inequalities, long-term health problems, underperforming economies, climate change, and many more – require long term forward thinking which is impeded by the current funding processes.
With longer periods in which to balance their budgets, councils can make the necessary investments to prevent and intervene in the biggest problems in our communities at an early stage, ultimately saving money for the public sector in addition to improving quality of life for our citizens.
And by extending the settlement period, local government will be treated on par with other parts of the public sector such as the NHS, which is afforded five-year settlements. Moving to align these funding settlements can only foster greater collaboration and partnership working across areas such as health and education.
Operating in an austere environment means making the best use of the money available – and that means government bringing an end to competitive bidding pot processes. Doing so not only costs the state nothing but it would actually save resources by removing costly and inefficient bidding processes from the workload of both council officers and civil servants.
Longer-term funding and a reduction in the number of disparate funding pots will also greatly help councils to encourage private enterprise to invest in local areas – a key role given the new government’s focus on growing the economy. However, these reforms alone are limited in what they can do to help improve service quality for our communities and drive economic growth.
Click the image to read all articles in the Municipal Missions Manifesto series.
The current system of revenue generation at the local level fails to empower local authorities or people as there is little relation between need in the local community and the funding that their councils receive. By increasing the financial freedoms and flexibilities at the disposal of councils, the government can empower local places to respond to local conditions. If councils were given freedom over fees, charges, business rate retention and council tax levels, funding could be linked more directly to need, improving the simplicity and transparency of local authority funding and spending, which is necessary for local accountability.
Ultimately, it is clear that the system as a whole is not fit for purpose and is an anomaly at the international level. While the new government does appear to have plans to radically rethink the system in the near future, at Solace we will keep making that case to consider the whole range of options – from localising government spend, place-based budgeting and/or introducing new forms of local tax which would all go a long towards empowering places – another key aim of ministers.
Making the UK more financially autonomous at the local government level could have a huge range of benefits, from improving regional equalities, boosting democratic accountability and engagement, and releasing the handbrake that has held back local and national economic growth for far too long.
While it seems we may have to continue to wait for more radical reform, at Solace we will argue that we cannot continue to ignore the issues plaguing local councils – central government must grasp the nettle to properly address the systemic financial challenges facing local government. Doing so would not only be good for the sector but the country too as it would unleash the potential of places to create good new jobs and drive local and national economic growth.
Without all of this, including sustainable and sufficient finances which will also allow areas to think longer-term and invest in prevention and early intervention services that will result in better quality of life for their residents and savings to the public purse in the future, communities – and the country – will suffer higher costs in many ways for many years to come.
Patrick Melia is spokesperson for local government finance at Solace, the membership network for public sector and local government professionals, and chief executive at Sunderland City Council.
For more information on Municipal Missions Manifesto, read our introduction to the series here. All articles in the series are collected here.
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