Local government minister Rishi Sunak has told LGC ministers will not seek to curtail most councils’ commercial initiatives, insisting fears of excessive risk exposure applied to a “handful” of authorities.
Rishi Sunak interviewed: key points
- It’s “prudent” to look at councils whose borrowing is “significantly out of the norm”, declares minister
- The ‘continuous improvement tool’ announced by James Brokenshire will include an analysis of sector’s efficiency and build on other government departments’ work
- Minister heralds “largest year over year cash increase in this four-year settlement period”
- Councils in deprived areas have significantly more spending power than wealthier areas
Housing and communities secretary James Brokenshire on Thursday used his local government financial settlement speech to reveal talks are ongoing between the Ministry of Housing, Communities & Local Government and the Treasury on possible “further intervention” where councils are deemed to be exposing themselves and taxpayers to too much risk.
In an LGC interview, Mr Sunak insisted the ministry did not view councils’ general commercial activities as a problem, but said he shared the concerns of the Chartered Institute of Public Finance & Accountancy that some authorities’ levels of borrowing are too high.
Recent research by The Bureau of Investigative Journalism, in conjunction with LGC, found Spelthorne BC invested by far the most in property between 2014-15 and 2017-18, with an outlay of more than £600m, followed by Runnymede BC with about £350m.
Mr Sunak refused to comment on these councils specifically and was keen to emphasise the important role councils play in driving growth.
He said: “[Mr Brokenshire] was not talking about a general clampdown on councils being entrepreneurial, commercial or doing things pragmatically and sensibly that economically benefit their areas.
“He was not expressing a view that commercial activity is a bad thing, in fact I think rather the opposite. Councils can play a very sensible and powerful role in the economic regeneration of their areas.
“If there are a handful of people who are doing something quite significantly out of the norm it would be prudent and quite frankly odd if the government did not look at that.”
LGC also questioned Mr Sunak on the ‘continuous improvement tool’ for councils which the secretary of state said would be launched in the spring to help councils “make the best of available resources and increase efficiency”.
After some initial confusion over what LGC’s question was referring to, Mr Sunak said the tool would consist of an analysis to provide a “proper understanding” of efficiency in the sector and build on work within the Department of Health & Social Care and the Department for Education.
“There is enormous opportunity there. It is not just about saving money it is about improving the quality of services,” he added.
When asked whether it was councils themselves or years of funding cuts that are to blame for some moving towards a statutory core offer of services, Mr Sunak said difficult decisions have had to be made both by councils and central government.
But he insisted recent funding pledges and the financial settlement showed the government is supporting councils.
Mr Sunak added: “Councils individually are quite rightly the ones making those decisions closely to those they represent; it is not for me to sit in Whitehall to dictate to people exactly how they should serve their constituents.
“When it comes to funding, a combination of the Budget and the settlement shows an enormous vote of confidence and support for the sector.
“In aggregate the resources available to councils are growing significantly ahead of inflation in this forthcoming year. It is the largest year over year cash increase in this four-year settlement period.”
Analysis by the Institute for Fiscal Studies following the financial settlement showed the least deprived fifth of councils have seen a 0.3% real-terms funding increase, while the most deprived have seen a funding cut of 2.8%.
Mr Sunak said he had not read the research but insisted councils in deprived areas had more money available to them.
“The most deprived councils today have core spending power per household that is about 23% higher than the least deprived,” he said. “There is more money available to areas of higher deprivation. Deprivation is part of the existing funding formula and different areas’ ability to raise council tax.”
Sunak: no 'general clampdown' on council entrepreneurs