A sustained crisis in social care funding, complications in business rates devolution and the lack of clarity around Brexit all make for an uncertain year ahead in local government.
Nobody could pretend that 2016 was a golden year for local government.
True, 98% of all local authorities were able to settle for stable funding going forward. But this was hardly a major step forward considering it involved flat-lined finances and business rates income that is ever more uncertain.
Meanwhile, the stresses of trying to meet ever increasing demand in social care and children’s services has become even more evident. The greater proportion of top tier authorities had overspends of some size in these services during 2015-16.
What might be considered a surprise (but shouldn’t have been) was the fact that central government had no plausible solution to these problems going forward, thus increasing the stresses on authorities in 2016-17 and beyond. The increase in the social care precept, announced by Sajid Javid in December, was fairly predictable but is, of course, an inelegant solution.
It has been described as creating “post code lottery” and it is certainly true that there is no way of equalising demand and resources. The move to look at changes to the New Homes Bonus to help out has not been greeted with wild enthusiasm by district councils who rely on this to balance the books —though it has to be said, the actual effect is quite different across authorities as a whole.
The social care problem has been foreseeable for years and solutions have been offered by various commissions. In times of austerity, however, it is difficult to see how a thoroughly successful solution can be found. The problem has led to claims that in a number of authorities 90% of the funding goes to less than 10% of the residents.
Children’s services does not attract the same headlines but in many authorities this is becoming almost impossible as well. Here there is a real conflict between risk and cost. The risk of failing is considered too high in many authorities and the stance taken by the regulator is unhelpful, taking little account, as it does, of the overall budgetary situation of the authority.
2017
As we stand at the start of another calendar year do things look any better? Answer: no, not really.
The work on the devolution of business rates continues. This has become a huge industry and suffers, as with all central government departments, from civil servants being lost to the Brexit cause.
It has it has to be said, the work on business rates has become much more complicated that originally envisaged, and the work on fairer funding — which was given a longer time frame and yet to be seen — is bound to be contentious. Losses on appeal have become very difficult and finding finance for reserves for losses an increasing problem. External auditors are becoming more concerned about whether authorities really are making lawful balanced budgets and will be looking especially at business rates this year.
Generally, budgets by now will be in their final stages, but I know of many authorities have not yet settled necessary savings with members and other “minor” details.
As I have said before, members were not elected to stop everything interesting and to spend only on growth in statutory services. There are issues in some authorities about elections and social care precepts. Section 151 officers will be under pressure again to cut corners and hope it all comes out on the night but this is becoming a risky strategy.
There is some bright light. The general experience of the pension fund revaluation has, for most authorities, been a positive one with employer’s rates at worst held and funding levels generally very respectable.
When the government actuary reports there will be a number of authorities with funding levels in excess of 100%. This is partly because of a more lenient method of valuation, but generally reflects the correct situation. Current equity levels will give further hope, though that may be short lived as we move seriously through the process of leaving Europe.
Interestingly there were eight people in the Department for Communities this time last year dealing with LGPS , now there is one. This year will see authorities wrestling with issues arising from pooling where the governance has still not been finally settled.
The implications of Brexit are still not understood. Local authorities have in many instances done well from EU funding. Whether that can be maintained is a little doubtful. There will also be increased care costs depending on the migrant decisions.
A career in local government finance has always been challenging and that continues and then some.
I hope you all have a very happy New Year.
Richard Harbord is the former chief executive of Boston Borough Council.
