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Future local government finance: trick or treat?

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LGC’s essential daily briefing.

Halloween might be seven weeks away but resurrections are already ‘en vogue’.

Devolution is slowly rising from the dead while the controversial transition grant made available to some councils over the past two years could be set for a revival. 

Hundred per cent business rates reforms are being woken up after a summer on life support with LGC revealing today that Leicestershire, Suffolk and Surrey are leading the charge to become the ‘rural’ pilots the Department for Communities & Local Government craves.

These are, though, just pilots so the thorny issue about how all councils will be financed in the future beyond 2020-21 is still up in the air.

The Conservative manifesto committed to giving “local government greater control over the money they raise and address concerns about the fairness of current funding distributions”.

Plans for more business rates pilots in 2018-19 (and for just one year only) aside, there has been little indication from ministers about what happens when the current round of multi-year funding settlements runs out at the end of the decade.

There’s no doubt gaining full control of the £26bn business rates collected locally each year would go some way to helping local authorities to better bridge the £5.8bn funding gap they are facing by 2020. But without legislation, the 100% rates retention policy is being implemented in a piecemeal manner with different agreements for different areas. 

Society of Local Authority Chief Executives & Senior Managers president Jo Miller told LGC in June that councils were in urgent need of some “clarity and certainty” over their financial futures “if we are remotely able to serve our people”.

Those words were reiterated last week by Gavin Callaghan (Lab), chair of Basildon BC’s policy and resources committee, and de facto leader of the council.

“The government was generous with its words about empowering local councils, but this looks now just like empty rhetoric,” he said. “You cannot empower local councils if you impoverish them. This needs decisive action and fast.”

Bearing in mind Cllr Callaghan said he was still waiting for communities secretary Sajid Javid to respond to his letter on this subject from 10 weeks ago, LGC would urge caution against anyone holding their breath for a ‘fast and decisive’ answer anytime soon.

Cllr Callaghan is concerned more business rates pilots will just see the government kick major decisions about the future of local government finance “into the long grass”.

LGC learned over the summer that ministers felt councils could cope in the short term at least as historically they were issued with their budgets on a year-to-year basis.

But as Ms Miller previously told LGC: “The reason why we have managed this period of reductions well is because we have had four-year plans, but they were predicated on something happening in 2020. Now we don’t know what that is. It is no way to run a business.”

Councils are, after all, multi-million pound businesses. Not only are they big businesses but they are big businesses delivering essential public services that are meant to keep children and adults safe, build harmonious communities, and grow the economy (to name just a few of their key roles and responsibilities).

Halloween or not, councils (and most importantly the people that they serve) deserve more than to be treated like children knocking at the government’s door for a trick or treat.

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