There’s no respite this holiday season. More than ever councils need an early settlement as well as certainty over the support they can expect from Whitehall over pandemic costs, writes Chris Buss.
In the years when I was a serving section 151 officer, the school summer holidays were, perhaps, a respite from the normal, hectic nature of normal life. The accounts would be put to bed, or at least be with the auditors who, in those days, seemed more co-operative than today; service directors would be off finding savings in line with targets drawn up in May or June; and there was, or so it seemed, a natural gap in the finance director’s annual circle of life before the autumn. Even elected members seemed to be away and, unless there was an unpredicted catastrophe, there was time for a break and to recharge in body, mind and spirit.
Like so many aspects of life, the coronavirus pandemic now appears to have put paid to this respite, creating a real risk of burn out just when councils need their section 151 officers to be at the very top of their game.
The endless round of “Teams” meetings (although other proprietary brands are available), MHCLG questionnaires, doling out government grants and the inability to take a proper break until recently will all have taken their toll.
Uncertainty
But on top of all of this the greater concern must be the complete lack of understanding at that heart of Whitehall about how local councils fix their budgets: It’s a fact that they cannot simply turn off spending at a stroke when resources are unexpectedly unavailable.
Finance directors are rightly concerned about the uncertainty over next year’s budget. Uncertainty will lead to late decisions, or ones which have not been fully considered and, inevitably bad.
In some councils there will be pressure on the section 151 officer not to go for cuts as the council works on the Micawber principle that something will turn up. Unfortunately, I very much doubt if anything will or, if it does, it will be too little as well as too late.
There will be real issues in trying to set an honest and true budget for 2021-22. I cannot remember a time in my forty plus years in local government finance when there were so many uncertainties and known unknowns.
It is the list of known unknowns which, in my view, is the biggest impediment to budget planning. These are in no particularly order:
- The level of government support for the impacts of the pandemic this year;
- the impact of the pandemic on expenditure and service level income next year;
- the impact on the collection fund of the pandemic in the current year;
- the impact on both council tax base and business rates base of the economic down turn;
- the level of future support for business rates;
- the overall level of support in the settlement for 2021-22;
- the trigger level for a council tax referendum;
- the possibility of a second wave locally or nationally; and
- the size and shape of the economic recovery.
I’ve probably left something out but the list is large enough. It’s far larger than normal and when I look back the most difficult issue in the past ten years was the in-year budget cuts following the 2010 general election.
Moving parts
So, what can be done to make some of the unknowns more known, in effect nailing down some of the moving parts and thus making life just a little more certain?
The first thing would be for central government to give a clear commitment on exactly what they will pay for and what is not covered in relation to funding the current year’s costs and loss of income arising from the pandemic.
Arriving at a number may not—in fact, certainly won’t—give an answer that’s wanted, but it would at least give certainty and nail down one part of a fluid equation.
Firstly, central government needs to say what the level of support is so at least the call on current year’s budgets, or reserves, can be known and thus the likely impact can be estimated with a bit more certainty.
This, of course, assumes no second wave or return, locally or regionally, to lockdown.
The second is for the government to give as early an indication as possible of the settlement and referendum cap. The usual date of a week or two before Christmas really isn’t any good this year, particularly with all the known unknowns that exist at present.
I realise that these are unusual economic times and the argument is that we should await the spending review. However, the date for this above and beyond the announcement on the government web site that it will be “in the autumn” is unknown.
Ironically, the same announcement says that the review will prioritise improving outcomes in public services. However, the delay in announcing the settlement, and results for individual councils, could have the reverse effect as public services will have to be further reduced to provide balanced budgets, effectively restoring the austerity that the Chancellor has said we will not return to.
I’ve referred to early knowledge of the referendum principles, the impact of increased levels of council tax support cases and delays in development which will impact council tax bases. Some figures I’ve seen give a situation in which a three percent increase in council tax yields less income than was anticipated in the current year.
With inflation going down towards nil at present, any increase in council tax will look high, but somehow the referendum limit will have to be lifted to enable councils to set a balanced budget, unless, of course, that requirement goes completely. Something that, in my view, would be expediency taking priority over what is proper practice.
Imponderables
The remaining known unknowns are just that. I defy anyone to come up with an accurate assessment as to what will happen to the economy once furlough finishes, whether there will be a second wave and the impact on services.
The impact of life style changes on service delivery and costs are a great imponderable. As a simple example, will the increase in waste arising from domestic properties seen in some London Boroughs during lockdown continue as working, and eating, from home continues to add to this cost stream?
In a similar vein, what assumptions do councils make on the use of leisure facilities, or will they find themselves with limited usage and no one prepared to run them? These are just two of the many imponderables that finance directors will have to battle with in the upcoming months.
Budget setting for 2021-22 will be, for most councils, a very difficult call. The least the government can do, in those areas where it can, is to give certainty as quickly and as clearly as possible. If by some miracle this certainty is achieved in the next few weeks then, to go back to the song misquoted in the title, Section 151s may then be able to agree this sentiment, unless your choice of destination is still out of bounds:
“One of these mornings, you’re going to rise up singing, Then you’ll spread your wings and you’ll take to the sky.”
Chris Buss is a former finance director at Wandsworth council.
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