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The lack of vision from central government is concerning

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The Local Government Finance Bill would have been the latest adjustment to the basic model of local government funding, following years in which much has changed in the relationship between the centre and local authorities.

Many of these changes have added layers of complexity and it is becoming increasingly difficult to see any coherent vision from central, or for that matter local government, about how councils should be funded and how their responsibilities should be organised.

The centrepiece of the bill was a proposal that local authorities should retain all the proceeds of business rates collected locally. This was strangely presented as a transfer of resources from central to local government, even though the proceeds of the rates were already statutorily committed to funding local services.

The Better Government Initiative was formed in response to widespread concerns about the practical difficulties faced by government today. Its members are former senior civil servants, including a number of past permanent secretaries and director generals, from across Whitehall.

The Better Government Initiative does not focus on the merits of policies but on the quality of the processes which lead to them. For a change such as this we might have expected to see:

  • A clear statement of the problem being addressed and of the desired outcomes
  • Consideration of alternative approaches
  • Some evidence of a link between economic growth and rateable value increases, including the impact, if any, of the incentive effect of the 50% rate retention regime already in place
  • Evidence that local authorities are not already pursuing economic growth for the other benefits it brings
  • Some exemplification of the dynamics of the new system.
  • What would the impacts on local services be if it proves that some authorities find it easier to attract growth perhaps on the back of government investment like Crossrail or HS2? Or what would happen to an authority faced with long-term decline in business activity for structural reasons?
  • Consideration of unintended consequences such as a reluctance to permit the conversion of business properties to other uses because of the revenue impacts for the council.

We are not aware that answers to any of these issues have been made public even if the work has been done. We do know of a study by the House of Commons Library showing no evidence of a link between economic growth and rateable value increases, perhaps because modern growth is not dependent on property so much any more.

If local discretionary spending is squeezed out completely, to what extent do we still have local government, as opposed to local delivery agencies, at all?

Surprisingly, local government seems to welcome the proposals. This seems to be partly because it puts some sort of a floor under further grant reductions and partly because they hope for further reforms giving more local control over tax rates and exemptions. That may be wishful thinking. The early indications were that the Treasury had estimated that the amount raised by business rates and council tax in future will exceed the total planned for local spending and efforts were being made to identify further services which can be transferred to local authorities to absorb the slack.

Perhaps in the end, it is the quantum of planned spending at the local level which is of the greatest concern for the future role and capability of local authorities in the provision of public services. On the current trajectory, many local authorities are expecting that they will soon only have funding sufficient for their inescapable legal obligations. But if local discretionary spending is squeezed out completely, to what extent do we still have local government, as opposed to local delivery agencies, at all?

In the short run, the financial pressures are promoting unplanned or, more charitably, organic restructuring of local authorities in an attempt to share costs and make efficiency savings. In this, as in much else, there is little sign that central government is offering any vision for the future shape of local government or guidelines on how change should be done.

Phillip Ward, Better Government Initiative executive member and former director of local government performance in the Office of the Deputy Prime Minister

The full text of this article is available at www.bettergovernmentinitiative.co.uk


 

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