Comment | 'local authorities need a new financial model'
By Phil Catney, Senior Lecturer in Politics. This article first appeared in the Stoke Sentinel as a Personally Speaking column on Thursday, June 15th, 2023.
In the run-up to the May elections, it was common to hear complaints about the state of our roads, the growing inadequacies of local public services, and how little we seem to get for our council tax. This is not isolated to North Staffordshire and is increasingly common across the UK. Local government is in a state of crisis and there are two aspects I'd like to examine here: a crisis of confidence and one of funding.
Let's start with central government's distrust of local government. While national governments have given more powers to the 'metro-mayors' like Andy Street, Andy Burnham or Ben (soon to be Lord) Houchen, and distributed money to 'combined authorities' for devolution deals, local government has received less favourable treatment. This distrust is visible when considering some of our greatest challenges. Take land-use planning as an example. National parties are desperate to show that they will tear up the planning rules to meet our housing shortfall. But they ignore the positive role council house building made in meeting our supply problems in the immediate post-war decades.
They also neglect consideration of the underlying causes of complex problems and resort to the politically easy solution of blaming planners or local planning committees. With this mindset, the problem of the housing market is not attributed to the financial interests which have long skewed the housing market into a position of under-supplying housing while allowing for the creation of super-profits off every parcel of land developed. No, the answer from Westminster and Whitehall is to further weaken local planning powers so that councils have even less scope for negotiation.
The failure of this approach can be seen in the failings of capturing the benefits of development for local communities. Land values in the UK remain extremely high and national governments of different political complexions have struggled to devise effective policies to capture these windfalls. And yet there are good examples of municipal action on these issues from other countries, but these ideas are pushed to one side because Westminster and Whitehall do not trust local authorities to be something not considered in the UK context.
Now let's consider funding. Despite how eye-watering each of us feels our council tax to be when we receive our annual bill, only a small proportion of council funding comes from this. Local government is heavily reliant on central government funding support to deliver core services. But this 'block grant' has reduced in real terms by around 50 per cent since 2010. This has meant deep cuts with many local areas targeting their provision of non-mandated services.
Aside from lost services, there is less money coming into the local economy. Stoke-on-Trent City Council has lost out on hundreds of millions of potential funding over the past decade which could have been circulating in the local economy. Councils in other parts of England sought to offset the strains of long-term cuts through speculative enterprises with sometimes disastrous results. For example, local authorities tried to deal with housing problems by setting themselves up as housing developers with massive layouts for limited return or housing unit development. Another example is energy. Long before Ukraine's invasion, local authorities sought to set up municipal energy companies to compete with the largest energy companies. These have racked up considerable debts and done little to challenge energy poverty.
The consequences of these forays into the world of entrepreneurial action have been to make it increasingly common for local authorities to issue 'section 114' notices - required to be issued when a council cannot balance its budget and where it must stop all non-essential spending. Councils such as Thurrock and Croyden issued these notices in 2022 (Croyden is on its third in recent years). Most recently Woking has declared its debt to be £1.2bn. That could fix quite a few potholes. While these high-profile failures of leadership might confirm that government scepticism about local government is well-placed, the point is that most councils have brought spending down, although not without pain.
Setting aside the misadventure of some local authorities, the demands on local authorities to deliver core services are enormous and the stream of funding is insufficient. The current model for local government funding is clearly broken. Local authorities must lobby for an effective subsidy for the various demands that fall unequally on them. Challenges like the sustainable provision of adult social care - the greatest long-term demand on local government - cannot be resolved without a different financial model.
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