Agent151: Funding and a ‘gentleman’s agreement’
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Someone should just come out and say it. We local government insiders all know it’s the case, but I wonder if the general public, the voters out there, are conscious of it. They won’t be surprised to hear it, I am sure, as there can’t be anyone left out there in this time of Trump, Brexit, fake news and election fever who hasn’t already been inoculated with a healthy dose of cynicism.
What am I on about? Well, since no-one else wants to make a big deal of it, I will say it: the government fixes local government funding to favour local authorities of the right political persuasion. Indeed, whilst openly talking about funding based on need and fairness, behind the scenes it goes to some lengths to ensure that funding isn’t fair. To spell it out, this means that some people get a better deal on council tax and the quality of their local services than others because their council is aligned politically with the government. And that isn’t right.
Aha! You say. The pundits always talk about the settlement moving money around between London and the shire counties, the north and the south. This is not news! Well, yes they do. But the language used in the analysis they provide is surprisingly neutral. They describe what happens, but they stop short of attributing a motive. They don’t say anything about the behind-the-scenes deal-making that goes on. Well, they didn’t… until the case of Surrey County Council popped up earlier this year.
Gentleman’s agreement
You may remember that Surrey, a Conservative council, had planned a government-embarrassing 15% council tax increase, which was then scrapped after secret meetings with senior cabinet ministers had taken place.
David Hodge, the leader of Surrey council, was recorded telling Conservative colleagues that a “gentleman’s agreement” had been reached with Sajid Javid, the communities secretary, and Philip Hammond, the chancellor. And there it is: a Conservative government and a Conservative council caught, if you’ll forgive the expression, in the act with their pants down.
Hodge also said in the recording that, “There may come a time that if what I call gentleman’s agreements, that the Conservative party often does, are not honoured, we will have to revisit this in nine months or a year’s time.” We learn from this that this sort of secret agreement with the government is done “often”!
When the news broke both Sajid Javid and Surrey Council firmly denied there was a deal. The government’s official statement on the matter denied that any deal had been done, but helpfully confirmed that conversations about local government funding with councils took place regularly. What kind of conversations it omitted to say, but by mentioning this regular dialogue no doubt it was hoping to make it sound commonplace and entirely above board. I’m sure most of it is.
Jeremy Corbyn, the Labour leader, raised the matter in the House of Commons the next day. Had there been a sweetheart deal? The prime minister said any such suggestion was an “alternative fact”. Then, the day after, it emerged that Surrey county council would be part of a new government pilot on business rates retention.
So what happened? Was there a deal? Did David Hodge unfortunately misreport what had happened to his colleagues? Or did ministers, DCLG officials, councillors and council officers lie, in order to cover up a dodgy deal?
You can draw your own conclusions on that particular case. But the fact is that political favouritism by government, whether Conservative, Con/Lib Dem Alliance, or Labour (and it has happened under all of these) in funding local government causes real inequality and is a fact of life. So, other than through bare-faced denial, how do they get away with it?
Getting away with it
Method one is by having a very complex formula for distributing funds — so complicated, in fact, that perhaps only two or three people in the entire world understand it fully. This formula contains several levers that can be used to influence the distribution of funds in a way that almost no-one would ever notice or be able to unpick. Method two involves presenting the funding outcome in a way that no-one can make sense of. Spending power is an abstract concept that leaves the average voter none the wiser.
Method three is awarding specific grants outside the normal funding method, based on very cleverly woven criteria, and method four is inventing pilots and joint working initiatives that councils can be selected to join based on invisible criteria.
It won’t have escaped you that the government is currently in the process of designing the system for 100% business rates retention by councils. If you were hoping for a transparent and simple system that recognises need and distributes the gains from growth fairly, then you should prepare for disappointment. The design brief isn’t what you think.
Agent151 is a senior local authority finance director.
