LGC’s essential daily commentary
Today’s news from Parliament #1: PM ditches plans to extend local housing allowance cap
Today’s news from Parliament #2: Minister rejects social care funding gap
Today’s LGC analysis: Variations in Homelessness Reduction Act funding revealed
Councils need to drive growth, both to create jobs and opportunity, and to boost business rate and council tax income to fund essential services.
Full business rate retention may have stalled, as has devolution, but Westminster’s spiel still tends towards council self-sufficiency. Failure to address social care funding only increases the pressure on councils’ finances. Authorities are therefore increasingly seeking new sources of income.
As major holders of property in their local areas councils possess the ultimate resource to drive their area’s economic fate. Growth has many drivers – geographical advantages, skills and workforce health are all significant – but financing the physical assets that attract business investment is a significant factor. This week’s LGC analysis explores how different councils are going about attracting capital investment into their areas.
Figures from the Department for Communities & Local Government show central government grants for capital expenditure to English councils falling by around £1bn to £8.3bn between 2015-16 and 2016-17, while council borrowing for capital expenditure has increased by almost £2bn to £6.8bn over the same period. Councils must also meet the costs of servicing debt for capital expenditure from shrinking revenue budgets. In short, if they want to build and invest for growth, they must be innovative.
This is playing out in a number of ways. The DCLG figures show around half of borrowing for capital expenditure comes from the Public Works Loan Board, and the other half from other, potentially cheaper sources, such as bonds issued by councils. Warrington BC and the Greater London Authority have followed the latter path.
Contributions from private developers have almost doubled over the last five years – although they still only account for 5% of the total financing of capital expenditure. Councils such as Croydon LBC have utilised the land assets they already own to enter partnerships with developers that have cash ready tp develop land, controversial with local residents though this may be.
Authorities can also use their ‘soft’ power to convene parties that stand to benefit from economic growth to invest in their local areas. By its very nature this type of influence is hard to quantify, but Bracknell Forest Council and Bristol City Council provide examples of how close partnership with investors can provide results.
For their part investors want councils to show vision, bravery and strong leadership if they are to stump up the cash required for major regeneration projects. Deborah McLaughlin, managing director, real estate projects at Capita told LGC investors wanted ”either a mayor or a leader who is willing to engage with private sector partners and give consistency of approach”. She aded: “Often development takes year and years and developers and investors don’t want a weak or inconsistent approach.”
The vogue for ‘inclusive growth’ driven by ‘empowered’ councils is taking hold. Councils need to attract inward investment.