Local government funding and services' cuts - where do we go from here?

Clive Betts, Chair of the Communities and Local Government Committee, shares thoughts on local government funding and services' cuts ahead of the Autumn Statement.

The coalition government cut grants to local authorities more than any other area of spending. Perhaps it was a cynical view that it’s always easier to cut when someone else can take the ultimate blame, or perhaps local government is just seen as more effective and more able to deliver efficiencies. Or perhaps both are true.

Not merely were the revenue cuts larger, but capital spend on social housing was cut by 60% - and even some of the remaining spend was devoted to rebadged affordable housing which for many wasn’t affordable at all.

If the revenue cuts had been applied in equal percentage across the board it would still have impacted hardest on the poorest areas, but in practice not merely did the poorest have the largest absolute cuts, but the largest percentage cuts as well. Ministers have sought to defend this by saying those areas with the largest level of historic grant will naturally have the largest cuts in grant, missing the point that those areas had the largest grant because they also had the greatest need.

The Tory government has continued the austerity programme with little indication Brexit will cause any change. The ‘just managing’ also rely on local services. They rely on disappearing bus services, and use leisure centres and parks rather than private clubs.

The pace of the cuts may have abated somewhat but now they are coming on top of the deep and persistent cuts of 2010 to 2015. Efficiencies and new ways of raising money have been trawled through repeatedly. Perhaps local councils have been too good at managing the cuts and the siren voices of doom are no longer being listened to.

But the reality is there for all to see. There are the visible signs of buses no longer running, libraries closing and refuse collection happening less and less frequently, but even here resourceful councils are using the problem of less money to successfully boost recycling rates. There are also however the more hidden cuts, like less inspections of food outlets, which won’t hit the headlines till the next major food poisoning scandal occurs. Parks can’t be closed like libraries can, but junior football pitches deteriorate, bowling greens close and the flowers disappear.

Councils have desperately tried to protect services for the vulnerable elderly, those with disabilities, and looked after children, but while the percentage of council spending on these services has risen, that is a larger percentage of a much smaller cake. As the number of elderly residents rises, the number receiving support for their care - whether in residential homes or in their own homes - has fallen. Virtually every council has cut eligibility criteria, so only those in the greatest need now get help, as long as they don’t have more personal assets than the maximum allowed. Those who do get help have often found their packages reduced and have suffered from the 15 minute visits by undertrained staff, often rushing from one house to the next and not being paid traveling time. Even worse are the regular stories of appointments being missed altogether, failing those needing meals, medicine or simply needing help getting up and going to bed.

The whole service is in crisis, not just according to the LGA and councils of all political persuasions, but also in evidence provided from those receiving care and their families, from carers and private care providers, from think tanks and academics. Councils are regularly terminating the contracts of poor care companies, but companies are also handing contracts back which they simply can’t make work.

The knock on to the NHS is clear, with more and more patients lying in beds waiting for home care to be put in place. In addition, what often is not referred to is the long-term effect of not providing care to those with medium or low level needs, who as a result are likely to end up in hospital more quickly. We are still a long way from joining up health and care services delivered by a variety of different organisations, with different principles and significant barriers to data sharing.

The decision to allow councils to raise an extra 2% on their council tax bills as a social care supplement is one I support, but the problem is that the poorest areas will raise least from this. The Better Care fund additional money is supposed to balance this but that won’t start to come in until 2018 and the crisis is now. The increased minimum wage has for many councils totally absorbed the extra funds from the supplement.

There is also the worrying challenge for democratic buy in that however important care services are, they are provided for a minority. How many times do we hear “what do I pay my council tax for,” from the majority who see the universal services like bin collection, and those available to all like parks reducing as they pay more to the council.

So, where do we go to from here. The temptation is to demand more from the government. Maybe in the short term that’s understandable, and we should certainly press for the bringing forward of the Better Care Fund to help plug at least some of the immediate gap in social care funding. There is also a strong argument to have a radical review of the principles of the funding of social care and whether the currently lottery of having to sell your house or not, depending on whether you end your days in residential care, should be replaced by some form of insurance system.

In terms of Local Government funding however surely the fundamental lesson of the last 6 years is what the centre has given, the centre can easily take away. We are the most centralised country in western Europe. It’s right we argue for more local control as resources are likely to be spent more efficiently, and services joined up more effectively and tailored to local needs.  In looking to decentralise however we should also look to allow councils more power to raise money and not just have a greater say in how to spend what central government gives them.

I know there is a worry that all this is unfair as poorer councils have less ability to raise money and will lose out, but unless we can guarantee permanent Labour governments the alternative of hoping for a benevolent centre to distribute largesse fairly always runs the risk of a repeat of the past few years. The Tories used the banking crisis as a reason to cut but we know in reality, behind the front of unavoidable austerity, the smaller state is what many Tories wanted to do regardless. They created their own virtue out of necessity.

The Tories are making much out of their plans to allow councils to keep 100% of their business rates. Not a big deal when you consider that councils did this until 1990 when they also set their own rate in the pound. Under the new proposals they will generally only be allowed to cut the rate, not increase it.  Councils will still have no say in defining the tax system, so a decision to extend small business rate relief further or any other change to the system could knock millions off council budgets with no redress.

Alongside this is a council tax which essentially can’t be raised beyond a limit set by the Secretary of State, and council tax bands which are regressive and out of date. The whole system based on 1990 valuations is not fit for purpose.

So if we give councils full freedom over council tax and business rates, relax the plethora of controls over fees and charges, make the housing revenue account genuinely independent, and look at localizing other property taxes, we may have the makings of more independent local government able to raise more of its resources and be properly accountable to is electorate. If the voters think councils can make a difference by making their own decisions on tax and spend, maybe they will be more inclined to take an interest and participate in the democratic process.

Of course, that leaves the issue of fairness and equity between councils alongside the need for greater local control. Look at the problem the government is having: trying to get a business rate system to encourage development by councils retaining the extra rates it brings in, and also using the same tax to help those who have greater needs and less ability to attract new business. Retention and redistribution are difficult to achieve in concert.

So, we need an alternative source of funding for an equalization pot. If that is simply a government grant, we’re back to the problem of leaving the poorest councils in the hands of an unsympathetic government. So how about local government as part of a new constitutional settlement having an entitlement to a certain level of income tax or VAT. That pot could then be used for equalization and if we are being really radical, local councils themselves might be partners in agreeing the distribution.

I hope my comments might at least stimulate debate and the attached appendix offers some factual backdrop to the challenge we are facing. Tory cuts much worse than those Thatcher inflicted at least push us into looking for solutions that don’t simply try to reverse what has happened.


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