Financial settlements for 2016-17 and the next spending review period need to be “right” or reforms to the local government finance system will be at risk, according to the Department for Communities & Local Government’s permanent secretary.
Melanie Dawes said her department was “excited” by chancellor George Osborne’s announcement that councils would get to keep 100% business rates by 2020, but added a lot of the details were yet to be worked out.
She the Society of Local Authority Chief Executives & Senior Managers annual summit in Bournemouth: “We’re only just beginning to think how we’re going to redesign the local government finance system in the light of the chancellor’s commitment [on 100% business rates retention].
“It’s great news. My department is really excited about that – it’s what we’ve wanted for some time – but I’m not going to say to you now we have got a clear plan. We have got to work that out with you and it will take a great deal of work to get those details right.
“And I’m very aware that if we don’t get next year’s finance settlement right and the overall spending review period settlement right we won’t have the right foundations on which to build the future system.”
Ms Dawes confirmed there “will still be a redistributive element” to the business rates reforms, an announcement she “didn’t predict” would happen on Monday, and added the way “risk sharing” works would also need to be looked at.
“We know we have an enormous amount of work to do but the fiscal challenge is turning into something more creative,” she said.
Ms Dawes acknowledged further budget cuts were forthcoming but added there was “enormous respect” in Whitehall for what local government had achieved over the past five years.
On devolution, Ms Dawes said it was “not a political fad” as there was a recognition by the government that long-term problems, such as reducing public expenditure and housing, “can’t just be solved by national solutions” coming from central government.
While there might be scepticism about the ‘Northern Powerhouse’ and it being “just a brand”, said Ms Dawes she added: “The point is it’s a brand that really means something to national politicians and we can build around that the really substantive issues around infrastructure investment, skills, and devolution.”
Ms Dawes admitted that “it would be easier” if there was a set criteria and “a few clearer rules” as to what can and cannot be devolved. However, she told delegates interested in securing a devolution deal to look at places like Greater Manchester and the Sheffield City Region to see “what is deliverable for us but can work for you”.
She said the “single most important factor” behind the most ambitious deals was “aligned local leadership with the local business community”.
Ms Dawes urged places to not “hold back” on their demands as she was “certain” more powers and controls will be devolved in the future.
She added: “Some of these things might not be able to be changed very much right now but over time. What we’ve learned over the last five or six years is that gradually you can make progress and maybe that’s not such a bad way to do it.”