Central reservation: Why Brexit paralysis in Whitehall is ruining councils’ financial planning
0With Brexit steering the Treasury’s aim for a three-year Spending Review off the road, Whitehall’s strong grip on council finance leaves authorities impotent, writes Richard Harbord.
For my birthday this year my sons bought me a copy – in very good condition – of the Local Government Act 1888.
As a keen collector of anything relating to local government finance, this was the perfect gift.
My sons said they imagined this was the legislation in force when I started in local government.
Strangely, some of it would have been (though these parts were consolidated in the 1933 Local Government Act) still partly in force at the outset of my career.
When I started, life in local government was much simpler than it is today and I was thinking about this in the context of financial planning.
We only did an annual budget and there was no need at all to prepare a medium-term financial plan.
Looking back, I think that was for two reasons.
Firstly, legislative changes were rare in the services we provided and secondly there was a great certainty about support from central government and a useful local taxation base in general rates which was entirely at authorities’ discretion.
I know that I have told this true story many times, but it does rather make the point.
At the London borough I worked for, my director of finance retired amid gasps of admiration from his adoring elected members, local paper and even the public.
The adulation was because, in his final year, he proposed a 0% increase in rates when the average in London was 6% or 7%.
He wisely retired on the 31 March and when I took over later that year I discovered that every penny of the reserves had been used to achieve this result.
In my first budget I had to propose an increase of 34%.
I was not popular and I was lucky it was not election year – I survived in my post.
But that is not the point. The point is that I could do so without any central government interference or flicker of interest.
Brexit blockage
As we see now, local government has no independent source of finance at all except some fees and charges and there is endless complaint about how much is made out of them without there being any understanding that that is how authorities survive.
At the moment, of course, any proper medium-term planning is absolutely impossible as the position for next April – let alone the following three – is a little vague.
The exit from the European Union has completely squeezed out governmental decision-making on everything else.
Arguably, this should not have been allowed to happen, as the failure to deal with local authority finance will affect a large number of citizens most of whom have a vote.
The last year of the settlement having gone, it would be natural to start from a review to set the priorities and amend allocations between different services.
The failure to have that means that somehow a settlement figure needs to be arrived at for next year.
It is already too late for sensible budgeting and merely uprating for inflation or some other device will perpetuate the current austerity in local government.
The Fair Funding Formula which as currently proposed looks anything but fair – arguments about the removal of the deprivation criterion are well-rehearsed.
The House of Commons Library website tells us that each authority will get an exemplification of the impacts in Spring 2019.
It seems to be stretching the seasons as we approach the longest day.
But even if there were exemplifications it is the quantum that is important – otherwise deckchairs and Titanic come to mind.
Taxing issues
Business rate levels are currently a “known” – but not for long.
The revaluation in 2021 may mean major changes to the tax base.
I understand the draft list is about to be published and a source tells me that enquiries about this have been met with the comment “but it doesn’t affect local authorities”.
Looking in my tea leaves I believe that the collection of this tax will be carried out centrally in the next five years.
In previous revaluations authorities would make provision for changes in the tax base in advance.
The situation over appeals is extremely confused. The central assumption is that there will be very few against the new list – we shall see.
Council tax continues to be an unfunny joke.
There clearly isn’t the time or political will to turn this into an updated and logical tax that could be understood by the public.
There is hope that the National Audit Office review of the Fair Funding Formula may bring changes, but in the meantime the noises off – such as the publication of the 11 authorities with unsatisfactory reserves – is clearly unhelpful.
It is a continual surprise to me that the level of understanding of reserves is so low.
Decisions of what are adequate levels should be left to individual councils, who know what they are doing – putting out scary lists of doomed authorities is at best unhelpful.
What I suppose is worrying is that looking ahead there is little parliamentary time to put things right.
I read that the new prime minister will need until the end of July to be up and running.
Then, Brexit continues, summer holidays beckon and there will be little time for very much before the next Brexit leave date of 31 October.
There surely has never been a more difficult time for local authorities.
