The local government minister has pledged to be a “champion” for councils and to lobby the Treasury to use next year’s spending review to provide the sector with sufficient funding to meet rising demand.
In an exclusive LGC interview, Rishi Sunak also insisted no local authorities were close to financial collapse, appeared to rule out sweeping council tax reform, and reiterated his support for a role for local areas in creating free ports outside the scope of UK customs tariffs.
Mr Sunak said councils have “shouldered a disproportionate share of the burden” as they have played the “starring role” in public sector deficit reduction over the past eight years.
He promised to “have that conversation with the Treasury come the spending review to make sure that the aggregate quantum of funding is sufficient to meet needs, not just for the next month and next year but for the foreseeable future”.
Councils’ funding levels should make “sure they can deal with everything coming in their way over the next few years”, he said. “I very much view part of my role as to be a champion for local government in Whitehall. That’s my job to go to bat in government on behalf of all the councillors that I have the privilege to represent.” He did however warn he could not “win every battle”.
Mr Sunak said the conversations had with councils during the finance settlement process were “not consistent with the idea that there is imminently about to be a lot more section 114 notices” following Northamptonshire CC’s financial collapse in February.
He blamed Northamptonshire’s financial problems on “an issue there around governance and a culture of living within your means that clearly wasn’t present” rather than underfunding.
Asked about councils such as Somerset CC, which has been told by a Local Government Association corporate peer review to get a “grip” of its overspending and repeated use of reserves to plug gaps, Mr Sunak said it is for each council to “manage their reserve levels” and “make those decisions” about when to draw on them. Un-ringfenced reserves across the sector had risen by 60% since 2010 to £21bn, he added.
Mr Sunak said it was still the government’s intention to localise 100% of business rates receipts “when the time is right”.
Asked whether full localisation of business rates was a poisoned chalice in the digital era when the value of premises often no longer indicate the profitability of a firm, Mr Sunak described them as an “easy to collect, easily identifiable tax which has remained relatively stable”.
However, he said: “In the short to medium term there’s going to be no major change to that but there’s a broader, longer-term question about our taxation system overall, not just business rates but corporation tax… In a digital age is our tax system set up in the right way?”
Mr Sunak said reforming council tax through additional property bands or revaluation is “not on the agenda” as taxpayers think bills are “high enough already”.
Neither did he support a royal commission to consider council funding, insisting the spending review will serve that purpose.
While Mr Sunak said it is “probably an unrealistic ambition” for all councils to be happy with the outcome of the fair funding review, “I like to think whatever we end up with will be able to command very broad support”.
Mr Sunak’s boss, housing and communities secretary James Brokenshire, previously told LGC there is “scope” for creating more unitary councils. However, Mr Sunak said the government is “not going to go out and force people to do anything”.
Recent Ministry of Housing, Communities & Local Government guidance said new unitaries need to serve a population “substantially in excess of 300,000” and cover a “credible geography”. Askied if this ruled out single unitary councils covering areas as large as Kent or Essex, Mr Sunak said: “I’m trying to think if we’ve put an upper limit… off the top of my head I can’t remember if we have.”
He urged a balance between scale “that enables you to do what you want to do” and the need to ensure local “democracy is still vibrant”.
LGC also asked Mr Sunak about his expressed support for free ports, which would be outside the UK for customs purposes, in a 2016 report for the Centre for Policy Studies. This urged a process in which devolved regions competed for the government to grant them free port status.
“I wrote about that as a backbencher when I had the freedom to write on new ideas,” he said. “Yes, I am very enthusiastic about them. [While] it’s a decision for the Treasury to grant an area that kind of status, it’s something that we could do after Brexit.
“The track record of these zones around the world is clear: they create manufacturing jobs, they boost exports. If you look at where our ports are they’re all in areas where we’d like to see more economic growth.”