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Chancellor told to free up council finances

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The chancellor could boost housing and infrastructure investment by rethinking financial restrictions on councils, chief executives and leaders have advised ahead of the Budget.

Caps on council borrowing and limits on tax increment financing have all come under fire as local government figures set out their stall ahead of the chancellor’s speech next week.

Council leaders and chief executives have also called for the government to make progress on a number of Lord Heseltine’s recommendations and rethink welfare reforms amid concerns they will cause additional hardship for low-income residents and add to councils’ costs.

Writing for LGC this week, LGA chair Sir Merrick Cockell sets out several asks, including a renewed call for the Housing Revenue Account borrowing cap to be lifted. This has been backed by other chief executives such as Southend-on-Sea BC’s Rob Tinlin who said lifting the cap “would have a marked effect on our ability to address local housing needs, and boost the construction industry”.

The Budget is expected to focus on attempts to boost house building and infrastructure projects, but local government figures have expressed frustration at government policies which have restricted councils so far.

David Cook, chief executive of Kettering BC, left, said tax increment financing, which aims to encourage councils to invest in infrastructure by allowing them to keep resulting additional business rate income, had been “strangled before it was ever launched”.

His authority had a development proposal which would add £1.2bn to the economy but was struggling to secure £60m investment for a necessary new road. He criticised Whitehall officials’ lack of commercial experience.

“We have to stop designing levers in London and listen to the front line instead,” he said. “It would help if they [Treasury officials] came out from behind their desks and saw schemes and commercial partners.”

Local government leaders have also called on the chancellor to make progress on promises to create a single pot of economic growth funding, as recommended by Lord Heseltine. This would devolve spending decisions to local enterprise partnerships.

As previously reported by LGC, Whitehall officials have been advised that some LEPs may not be ready for such powers and responsibility. This week South Tyneside’s leader Iain Malcolm (Lab) called for the single pot funding to be distributed instead to combined authorities. These “could raise finance for big infrastructure projects…with advice from the private sector via local enterprise partnerships”.

Paul Martin

Source: Wandsworth

Paul Martin

Reform of skills funding and planning, also recommended by Lord Heseltine, was another key priority for councils. Wandsworth LBC chief executive Paul Martin, right, said the chancellor “should provide the remit and resources to councils to place the commissioning of workforce skills at the centre of our priorities”.

Welfare reforms were another concern. Oxford City Council chief executive Peter Sloman said the “benefits cap and bedroom tax is creating hardship and homelessness which is increasing our costs”. He advised a focus on the creation of more affordable housing and living wage jobs instead.


Budget wish list….


LGA chair Sir Merrick Cockell (Con) said: “The chancellor is still in a good position to deliver on some of the key asks we put forward on behalf of local government. He can offer every place a local growth deal. He can listen to Lord Heseltine and help local areas generate growth by giving them access to a single pot for investment gathered from across Whitehall departments….” READ MORE

Kettering BC chief executive David Cook said: “In my experience of working with Whitehall, it lacks commercial understanding. Most Whitehall officials have not had experience of dealing withd developers, bringing commercial activity to market and making these growth proposals happen.” READ MORE

Staffordshire CC leader Philip Atkins (Con) said: “We are not looking for “handouts”, far from it, but I would like the chancellor to acknowledge how savings made locally from central services such as reduced welfare claims can be shared with local areas - creating the incentives for councils to do more to help the country deal with its deficit.” READ MORE

Solihull MBC chief executive Mark Rogers made a number of recommendations for the design of single pot funding allocations, including calls for an allocation to be made to each economic area of the country based on population, ambition and potential economic benefits. READ MORE

Bolton MBC chief executive Sean Harriss said: “An important ask for me is about business rates and in particular how business rates are impacting on the high street and therefore our town centres. The best measure would be to abandon the plan to postpone the revaluation, but some measure that doesn’t penalise council’s financially but lift the burdens on retailers would be very helpful. Obviously the chancellor could exempt us from further cuts in 2015-16, but I’m not holding my breath.”

Newcastle City Council leader Nick Forbes (Lab) said: “Local government has taken more than its fair share of pain in cuts - an easing up rather that seeing us as the easy option. Secondly, we need an independent process for determining [funding] allocations; the current system is discredited and mistrusted.”

Wandsworth LBC chief executive Paul Martin said: “The key issue is skills. The chancellor needs to identify the technologies and industries of future economic growth, and the mechanisms through which they can secure a skilled workforce. We have seen an array of agencies come and go - the Manpower Services Commission, Training and Enterprise Councils, Learning and Skills Councils, Regional Development Agencies. You would have thought that by now governments would have realised that local authorities are durable entities that are generally reliable delivery agencies. The chancellor should provide the remit and resources to councils to place the commissioning of workforce skills at the centre of our priorities.”


Brighton & Hove City Council leader Jason Kitcat (Green), left, said: “I’d like to see the government devolve more powers to local government to set their own financial destinies. If councils are going to be cut out from central government funding by 2020 then we should be given local discretion to set business and residential taxes as our communities see fit, not according to the views of Ministers.

“I also expect that under the new burdens doctrine agreed by cabinet that local authorities should be funded by the chancellor for the huge pressures on homelessness the tidal wave of welfare cuts will impose on us. Of course doing so would be an admission by George Osborne that the welfare cuts aren’t going to save the public purse anything like what they claim, at the price of great misery to our residents.

“Finally I think government need to own up to the injustice of expecting councils to pay out for business rate appeals which pre-date their localisation this coming financial year. We’ve had to set aside £7m this year alone for appeals refunds on cash the Treasury took before business rate localisation, there is no just case for government not funding this cost fully when they took the money in the first place.”

Oxford City Council chief executive Peter Solman said: “Our main hope is the City Deal enables us to invest in housing and infrastructure so the economic potential of our city can be achieved, it is clear to us that lack of investment is directly liked to economic under achievement of our potential, to create wealth for the nation. We also believe the only way to reduce welfare spending is through building more affordable homes and creating more jobs which pay a living wage, the current benefits cap and bedroom tax is creating hardship and homelessness which is increasing our costs.”

South Tyneside MBC leader Iain Malcolm (Lab), right, said: “I would like to see government support for combined authorities who could raise finance for big infrastructure projects, with the new single pot of regeneration funding coming directly to them - with advice from the private sector via local enterprise partnerships. The government also need to ensure that we don’t miss out on financial support from the EU, so unlocking national match funding will be critical.

“Given how the housing market has stalled any boosts for house building are welcome, alongside the continuation of the decent homes programme - which has made such a massive difference to our residents.

“The government’s commitment to the £75,000 adult social care cap is a step forwards, but it does not address the massive and growing demands on councils’ social care budgets which urgently need to be resolved.”

Southend-on-Sea BC chief executive Rob Tinlin said: “Infrastructure, infrastructure, infrastructure. Freeing up some more investment in critical local infrastructure has the wonderful impact of building for the future, boosting local investor confidence, providing jobs and enhancing the building food chain.

“Lifting the cap on Housing Revenue Account borrowing limits would have a marked effect on our ability to address local housing needs, and boost the construction industry.

“Localising the skills funding would also be a boon - we currently have a disconnect between skills commissioning, priorities, skills training delivery and outcomes. Localising the funding and delivery would allow us to target and co-ordinate to better effect.”

Warwickshire CC chief executive Jim Graham said: “We are getting to a point in time where it is impossible for the current Treasury team of ministers to avoid the criticisms that they’ve had long enough in post to make an impact, rather than looking at the performance of previous governments, the Eurozone difficulties, the worldwide economic downturn.

“The local government asks are but a microcosm of two bigger problems - they don’t appear to have a plan B [and] political apologists for the banks being unwilling to lend to business let the latter off the hook. So if it is a further period of local government austerity as we probably have all come to anticipate, so be it. But as we will deliver our side of the deal, they need to get a grip on the[se] two outstanding problems - and if the current team cannot deliver those, change the team.”

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