What Does 2011 Hold For Local Government?
Author: Tom Simpson, Localis |
Following the excitement and rumour surrounding the release of the local government finance settlement last month, 2011 will be the year when the actual impact of funding cuts to councils, rather than often unsubstantiated speculation, will take centre-stage.
It would, however, be wrong to cast the coming 12 months merely as a period of damage limitation for councils. Of course, it is difficult to ignore the scale of the impending reduction in Government grant to local authorities. But to come to a more balanced perspective, we need to delve beneath both the more dire (and headline-worthy) forecasts – hundreds of thousands of council redundancies and decimated social services are among the most prevalent – and the Government’s firm but largely unsupported insistence that councils should be able to completely avoid frontline service cuts. 2011 will in fact be a year of opportunities as well as threats for local authorities.
Councils may only have very limited control over the amount of revenue they receive, and they also have minimal flexibility on how they can spend that revenue, but they do have some capacity to shape positive responses to the cuts. The ‘General Power of Competence’ announced in the Localism Bill, enabling councils to undertake any activity not already expressedly forbidden, provides the basis for a fundamental rethinking of how local services are delivered and the innovation of service delivery models that focus more closely on the needs of residents. Accordingly, it is to be expected that during the coming year many more councils will follow the lead of a pioneering few and begin to share services and administrative responsibilities, especially those back office functions in which there is less imperative to have a high degree of local differentiation. It is also likely that more services will be outsourced to private sector providers, especially discretionary services such as leisure centres. Some councils will probably go much further in this respect and take steps towards redefining their role as service commissioners rather than service providers. The possibility of such a drastic change in function may concern those worried about staff reductions and potential accountability issues. However, such an outlook ignores the potential of many commissioned services to provide better value for money and more closely meet the needs of end users.
It is true that sharing and outsourcing services is not a panacea. The short-term savings these measures can generate can potentially be outweighed by the cost of restructuring, and in some circumstances the local council may remain the best provider. There is also the risk that sharing services between councils can reduce their responsiveness to the specific needs of local communities, thereby contradicting rather than facilitating effective localism. For many councils then, sharing and outsourcing alone will not make good the budgetary reductions they face in the coming year. Redundancies will have to be made and some services will have to be cut. The scale and detail of the cuts necessary to meet financial pressures are difficult to predict and are likely to vary significantly between councils. The findings of a survey of Chief Financial Officers at English councils undertaken by Localis shortly before the finance settlement indicate that councils will probably adopt very different approaches to cutting services. While many respondents highlighted specific services they felt would bear the brunt of funding reductions in 2011, there was little agreement as to precisely which services these will be.
It is undoubtedly true that the freedom to innovate afforded by the General Power of Competence would be even more effective if coupled with greater financial autonomy for local authorities, which would enable service design to be more responsive to demand. The reforms to local government finance announced so far by the Coalition Government have been limited, certainly in terms to the impact they will have in 2011. Nonetheless, by the end of the year the 16 trial ‘Community Budget’ areas, covering 28 councils, will hopefully have begun to provide robust evidence of the advantages of pooled budgets, paving the way for the nationwide roll-out of the scheme in 2013. There is also potential for the development of a more fundamental change to local government funding during 2011, although it will not be fully implemented during the coming year. This is the possibility that the existing business rate system will be reformed to allow councils more control over their revenue, and to provide a more adequate incentive for them to maximise economic development in their areas. The ‘Local Growth’ white paper confirmed that the Government is “actively looking” at ways to allow the retention of business rates so that many councils will be “set free from dependency on central funding”. We at Localis are currently examining this issue, and feel that effective business rates reform would constitute a sizeable step towards allowing local government sufficient flexibility to provide locally appropriate services. Certainly, it could be among the most important developments in local government this year.
During the coming year, councils will also have the opportunity to reinvigorate local democracy as the Government’s decentralisation agenda begins to restore clearer lines of accountability to their electorates. The trimming back of the inspection ‘regime’ that has built up in recent times may still have some way to go, but provides encouragement that this will be the year when councils will once again have to answer to their residents rather than to Government. Clearer accountability to residents means that councils will face increased pressure to meet the expectations of their local communities, especially since the Government’s decentralisation programme will pass additional responsibilities for service provision to local authorities. At a time of difficult spending decisions, this may appear in the short-term to be more of a curse than a blessing to many councils. But if it marks the beginning of a genuine culture change in local government, its positive longer-term significance will be unquestionable.
2011 will be a challenging year for many individuals and organisations in Britain, and councils are no exception. But opportunities will emerge alongside challenges, and if local authorities are able to make the most of these, 2011 could also mark the beginning of a more localist future.