It wasn’t that long ago that Ministers and senior civil servants were completely dismissing any suggestion that some individual local authorities were heading for the financial rocks, let alone that the whole sector was rapidly approaching a cliff edge.
I don’t think they are as complacent today. However, despite the continued insistence that they are not expecting any surprises it is clear that there is a lot of nervousness and finger crossing.
Establishment complacency has largely been fuelled by the way in which local government has managed to cope with the significant cuts in resources since 2010 assisted by the disciplines brought about by best value and comprehensive performance assessment. These cuts have been on a scale not faced by any other service nor by any government department.
Of course, the cuts have not been evenly distributed, but even the massive redistribution of resources from the poorest areas to the wealthiest has not offered sufficient protection to the latter, which are now in the front row of red-flag wavers.
Northamptonshire may be blamed as simply a case of bad management but they are not alone. Surrey, East Sussex, Birmingham, Northants, Shropshire , Somerset and Lancashire are already posting warning signs. Earlier this year the National Audit Office (NAO) said 10% of upper-tier authorities were 'vulnerable to financial failure'. A large number of district councils are now actively considering full or partial mergers as one way of cutting costs.
The ‘vast reserves’, which Eric Pickles claimed could be used to avoid any cuts, are now being used at a dramatic rate – not for the purposes for which they were intended, but to cover in-year overspends and next year’s planned expenditure. The NAO suggests that one-in-ten councils could run out of reserves.
Section 151 officers up and down the country will now realise that there is nothing to be gained by keeping their concerns private or by not drafting their S114 notices. Many auditors are busily re-reading S24 of the Local Audit and Accountability Act.
But the problem is a lot bigger than just a shortage of money. We have now reached a situation where the immediate financial challenges are absolutely compounded by all the uncertainties about local government’s financial infrastructure.
The Public Accounts Committee (PAC) asked the government to explain by the end of September why it believes that local authorities are sustainable in the current spending round, and, with local authorities, to agree a definition of financial sustainability and a methodology for assessing risk. Will ministers agree?
The green paper on adult social care funding is delayed till the Autumn. The problem doesn’t go away by delay. It’s a classic ‘wicked issue’. It is political leadership and courage that is required..
Given individual and collective failures in children’s services over the last decade and the justified criticism of councils’ performance , it was inevitable that we would see a significant rise in the number of children in the ‘care system’ . The Children’s Commissioner has now warned ministers that the £2bn resource gap inevitably means that crisis work will be prioritised and preventative work will be cancelled.
Housing is so high up the government’s agenda – we keep being told – but the promised social housing green paper has failed to materialise.
On the income side, the government has reaffirmed its long-term commitment to 100% business rates retention but refuses to give a timetable for implementation. NNDR is under attack as the retail sector is in turmoil and Amazon reveals that it paid just £4.5m in UK corporation tax last year and relatively little on business rates on its out-of-town warehouses, compared to its High Street competitors.
Similarly, unreformed council tax, with no extension of the bands and still based on 1991 valuations is increasingly seen as unfair.
So we need nothing short of fundamental reform. A significant increase in the quantum of funding available to councils and specifically a social premium and a slice of inheritance tax to meet the growing demands of social care as recommended by the joint select committee inquiry . Reform to council tax and business rates is needed to make them fairer and more effective.
Then there’s devolution , forgotten but hopefully not abandoned. Transferring powers to councils can improve services and value for money . Let’s start with the obvious candidates skills and transport. But if we are to see councils have a tax base able to grow with service demands we also need to devolve tax raising as well as spending powers. The Treasury may not like continuing demands from the LGA for more money but it likes the idea of giving councils the ability to raise that money themselves even less.
We may get some change but will it be fundamental reform?