A busy and unpromising timetable for local authority finances
0Richard Harbord looks at the large amount of central government measures affecting councils due over the next 13 months. Time is running out, the current uncertainty damaging, and the prospects for a favourable outcome dim, he says.
I am afraid that I have really become very disinterested in the course of the negotiations to leave the European Union. Except to note that they seem to be going on for ever and that means that the effect on everything else central government are supposed to be in charge off gets more and more serious.
I do know that there has been a succession of managing directors of major companies complaining about the uncertainty of it all. It would therefore be perfectly acceptable for local authority directors of resources to make a similar complaint.
Because of the difficulty in getting House of Commons time and the need to engage Members of Parliament in the very real difficulties facing the public sector everything is now going to happen in April 2020. Which, in case it hasn’t been noticed is only 13 months away.
There are two particular points about this. The first is that local authorities haven’t got any real idea about their funding levels for 20/21 onwards, and secondly, I just have difficulty believing that everything is seamlessly going to fall into place at that time.
I want to say something about the Fair Funding Review but on the way to that we need to note the other things waiting for implementation at the same time. We have progressed again to consultation on business rates retention but there are some very important issues hanging around that.
There is no real clarity around how losses on appeal are to be dealt with. This is a sizeable figure in most authorities and currently to achieve a lawful balanced budget due provision must be made for those.
That has proved difficult as it requires a judgement as to what the outcome of the appeals is likely to be and also when they will be finalised. There are various proposals for this being dealt with by central government but no real clarity, as much will depend on the final wording and it could well be that authorities will find there is uncertainty about which appeals will go to the central pot and which will need to still be met locally.
Uncertainty is worse than the current system. The second major point is that there was intended to be a reset for business rates which would change safety nets, top-ups and base collection levels for all authorities. This was due to be implemented at each revaluation. The difficulty is the form and extent of the reset. There has been talk of the system logically being reset in April 2020 to coincide with the introduction of the revised business rate retention system. However, there is a threatened revaluation at April 2021 and that could mean a further reset at that point.
And then there is the real biggy. The Spending Review. This is programmed for 2019 with implementation in April 2020. This is also a very tight timetable. The whole system being consulted on as far as retention and Fair Funding are concerned is based on an assumption that it will be fiscally neutral, i.e. the quantum will not change. I cannot see this working at all. Major change such as arguably there has never been before needs additional resources to make it work. The current consultation is around rearranging the deck chairs on the Titanic, but could be very serious for those authorities who lose from the new system. Remembering, of course that we do not start from a position of financial strength.
The danger is with the public sector Spending Review that there are sectors which have already made a strong claim to additional funds. It is more than likely that the NHS, Police, security will see reasonable additional funds and local authorities will lose out again.
The area of particular interest to many authorities is social care. The Green Paper which is now awaiting publication has been promised for a very long while, but there has been a failure by central government to face the realities of the need for additional funds. This is having a major effect not only on authorities but also on the care home sector. The question is will the Green Paper solve anything and how long will it be before it can be implemented.
Then there is the Fair Funding Review. Consultation ends next week. There is a desperate need for exemplifications. In the working group there was much discussion on the form of the new system. It could be fair and very complicated like the old RSG system with around 60 measures of need and a mighty regression formula which no one could understand, or simple and “rough and ready”. The consultation is based on the latter with little bits of complication added in.
There is no exemplification of the proposals but an underlying assumption that there will be no extra funds. This really will make it very difficult for those who miss out. In particular, there needs to be an understanding of the decision to exclude deprivation from the formula and the inclusion of homelessness, flood relief and other services in the base. You cannot get more simple than a per capita basis but the fairness of that needs to be discussed. The promise of an area cost adjustment will chill the blood of all who remember the attempt to use that in the original RSG formula. There is great difficulty in fairly equalising costs on the basis of spending power in different areas.
The concession to factors of need in certain services will disadvantage districts as all those areas are for counties and unitaries. The LGA say that simplicity is welcome but not at the expense disproportionally of accuracy.
The area cost adjustment will include factors for scarcity and density, but the failure to include deprivation is a major difficulty.
Some of the data used for the modelling of cost drivers is no longer updated by government and historical data will be used.
All in all, it difficult to enthuse when there is no indication of what it means on an authority-by-authority basis.
My conclusion is that I just cannot see all these things coming together satisfactorily over the next 13 months. My concern is that the current impossibility to do much needed forward planning will continue and that the sustainability of the system is under threat.
Richard Harbord is a former chief executive of Boston Borough Council.
