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Hammond must think big – or local government will collapse

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There is a sense of ‘too little, too late’ about the indication ministers are finally taking local government’s dire financial predicament seriously.

Nevertheless, if the Ministry of Housing, Communities & Local Government has rejuvenated its lobbying efforts within Whitehall, and the prime minister and Treasury are becoming more receptive to the arguments of the ministry and councils, then there is at least hope of progress (or slower oblivion). Housing and communities secretary James Brokenshire deserves credit for forcing the plight of councils up the government’s agenda.

Ministry permanent secretary Melanie Dawes last week said that the bigger decisions impacting on local government are likely to be made in next year’s comprehensive spending review, rather than Philip Hammond’s forthcoming Budget. While this is unsurprising, it should not mitigate the fact that councils are on the cusp of falling over now. Ministers will have more Northamptonshire CCs on their hands should they force the sector to wait for significant assistance until 2020-21 when the spending review kicks in.

The government needs to offer councils something to get through the next 12 months. By definition this will be a ‘sticking plaster solution’, but it should be one that offers more support than the measly plaster fished from the surface of a swimming pool that councils have become accustomed to – an orthopaedic cast, perhaps? The retention of revenue support grant at current levels (in real terms) for another year would be a welcome move.

It is suggested that there could be some movement in the spending review on giving local authorities greater freedom to increase council tax. This is long overdue – but any tax based on property values (or 1991 property values) raises vastly more money for some areas than others. While council tax should remain an integral part of local government’s funding mix, the government has never convincingly shown it is sufficiently mindful of different areas’ varying tax-raising abilities. This is equally true when it comes to business rates – a tax defended by Ms Dawes last week as “a very stable source of revenue”, albeit one which LGC would argue in the digital age increasingly fails to reflect firms’ ability to pay.

Failure to recognise that local government’s current funding models are unsustainable risks destroying the sector. Even though Mr Hammond will not solve councils’ problems next week he needs to address the point eloquently expressed by Solace president Jo Miller: that “no funding plan from 2020 is terrifying, inept [and] grossly unfair”.

Mr Hammond should announce next week that he is prepared to consider using the spending review to review all property taxes and the redistribution of money they raise to ensure they facilitate sustainable councils. Polluters – whether in the packaging, industrial or transport industries – must be made to pay more of the costs they impose on councils; tourist taxes or congestion charges must be seen as part of the mix. In short, Mr Hammond must indicate he is prepared to give councils real freedom to ensure that they are sustainable. If the government is to fulfil the PM’s pledge to end austerity, it must start thinking big.

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