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Uncertainty isn't only bad for business; councils must set budgets too

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LGC’s essential daily commentary 

BREAKING: Government to tighten LEP rules to tackle conflicts of interest

Across the country councils are beginning the process of setting next year’s budget in earnest, including a refresh of their medium-term financial plan, typically looking up to five years ahead.

In their valiant attempts to plan for the future, finance teams quickly come up against some fundamental uncertainties that only the government can address. But the signs are not good that this urgent need for clarity is widely recognised in Whitehall.

Yesterday care minister Jackie Doyle-Price declared austerity the “mother of invention” during a Commons debate on social care funding. This was on the day that figures from NHS Digital (formerly the Health and Social Care Information Centre) showed the numbers of people receiving care had continued to decline, despite an increase in expenditure driven by the national living wage and other rising costs.

The hundreds of thousands people who would have received care a decade ago but no longer do probably do not feel they have seen much in the way of invention. Indeed, the Institute for Government concluded only last week that almost all of the savings in adult social care since 2010 had come from reductions in “quality and scope”.

While most eligible councils will be factoring some extra cash from the social care precept into their budgets for 2017-18, some will also be contemplating the potential loss of better care fund monies as a result of a failure to meet NHS England targets for reducing delayed transfers of care. Longer-term, there is no indication the funding gap, which the Local Government Association has estimated to be £2.3bn by the end of the decade, will be addressed.

Ms Doyle-Price, who attracted the ire of Theresa May a few weeks back by managing to reignite the row over the so-called ‘dementia tax’, told MPs yesterday the forthcoming social care green paper would include proposals on caps and floors for social care costs, with a view to reaching cross-party consensus on reform. All very vague and not very imminent if you’re trying to decide whether you can afford to keep running vital services for your elderly residents.

To be fair, things are looking a bit more lively over at the Department for Communities & Local government, where officials and ministers at least seem to recognise the urgency of providing councils with some certainty over future funding plans, following the abandonment of the Local Government Finance Bill. This bill would have paved the way for local government to retain all of its business rates by the end of decade but without it, it’s not clear what happens come 2020.

The LGA’s head of local government finance Nicola Moreton told councillors at the body’s executive forum last week that rolling in existing local government grants could take local government up to 75% business rates retention by the end of the decade, with 100% to follow at a later date.

This could include grants such as public health and would effectively amount to the removal of all remaining ring fences on public funding, in theory at least. Whether that came with a corresponding lack of interference from the relevant government departments, or whether those departments would even readily agree to losing control remains to be seen. If they did not it seems unlikely that would be a battle the Treasury could be bothered to have at the moment.

LGC understands there are different legal opinions as to whether 100% retention could be achieved without primary legislation. Recent comments from the communities secretary Sajid Javid suggest DCLG’s lawyers seem to think it definitely would not. Mr Javid told the Commons communities and local government committee on 12 October that increasing business rates retention would not require primary legislation “if it didn’t require transferring new responsibilities”. To the lay mind at least one obvious solution would be to hand over the extra cash without any new responsibilities, in line with the argument of the LGA and others that the first call on the extra billions should be existing funding pressures. Just a thought.

DCLG has a job on its hands to make the rest of government recognise the urgency with which councils need answer to these questions. Failure to do so will pile yet more pressure on council finances. As we keep hearing during the debates over Brexit, uncertainty is never good for business.

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