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John Sinnott: The fair funding review is a challenge to the sector

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The mostly critical responses from local government to the government’s fair funding review reveal a great deal.

Once again, they show the weakness of local authorities in facing up to government in these challenging times. Understandably they are often governed by what the result might mean for one council or one group of councils. Yet the additional problem is that the sector has countenanced a broken system for too long.

The responses seem characterised by asking for more funding from government across the board with no real focus on priorities, by annoyance that other parts of the public sector fare better, and by no recognition of why a broken system needs repair.

The sector needs to look at that picture it is presenting and ask itself some questions.

Extra resources, even in the form of short-term gap plugging, have been welcomed by councils who benefit, and angered those who do not. One council says it is grateful; another threatens legal action.

Local government seems to have given up getting the same influence as the NHS, schools and police. There are lessons there to be learnt by those making the case for local government, where below the surface the representative role remains split.

The system’s flaws may have protected parts of the sector, but to the detriment of others. The instinct for the majority benefitting has been to preserve the bottom line and ask for more from government at every opportunity.

Fair enough, you might say. But some councils have also been able to claim credit for having no need to raise council tax. This is a gift from the system. It was never going to be sustainable.

The extent to which change must come is shown by my own council. Due to a formulaic quirk, Leicestershire CC has been the lowest-funded county for a long time.

If my council was funded by government at the same level as Camden and Kensington & Chelsea LBCs, it would be better off by, respectively, £350m or £348m a year. Funded at the same level as East Sussex and Surrey CCs it would be £121m or £104m a year better off.

Most councils claim to be low-funded. For the avoidance of doubt, the above comparisons are based on total funding as set out in the government’s core spending power calculations. As well as being the lowest funded per head, my council is also the lowest spending per head.

Recognising that the system is unfair and has lost credibility would be an honest start in responding to the consultation on fair funding. It is a technical consultation, but broad principles are important at this stage.

It would also be good to see change as transitional given the current extremes. Those who legitimately believe they and their citizens have been unfairly treated can see the consequences for those who would lose through change.

Leicestershire CC has taken a realistic approach to its position, establishing a wide-ranging transformation programme, taking tough decisions and protecting non-statutory preventive services, whilst arguing for fair funding. Naturally it is interesting how and why councils with substantially more government funding and a similar level of need have found themselves claiming straitened circumstances.

It was a mistake to abolish what the Audit Commission provided by way of challenge and assurance. If only the commission had not blurred financial management and performance management.

I agree with the National Audit Office that some local authorities need to improve their financial management, but I do not agree that the Ministry of Housing, Communities & Local Government necessarily has a leadership role in that.

What is needed is independence and an external audit regime which gives early warnings and assurance on the rigour of internal financial management arrangements. The Chartered Institute of Public Finance & Accountancy has pointed the way.

Local government does not want to be seen as responding negatively to the fair funding review. There is acceptance that the secretary of state and his ministers understand funding shortfalls and the escalating problems.

A relationship is needed where long-term change is the shared objective; the pros and cons of any system and its geographic and socioeconomics consequences are mutually accepted; obvious risks like over-reliance on business rates are not presented show-stoppers by local government; and ministers recognise part of local government’s problems comes from the siloed nature of government.

If the sector is not up for such a dialogue – undertaken in the context of a post-Brexit spending review and after ten years of austerity – and its own silos come to the fore, its integrity will rightly be questioned.

John Sinnott, chief executive, Leicestershire CC

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Readers' comments (1)

  • One of the (arguably few) upsides of Brexit is that the government will be able to design a proper regional policy for targeted regeneration and tackling deprivation on its own terms through the new Shared Prosperity Fund. This will mean the 1990s approach of delivering redistribution through local government finance is much less necessary

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