“Optimism will be short-lived among the 1,560-plus new councillors – Liberal Democrats, independents, Greens – elected last week in the cities and shires of England, where countless councils changed hands.
These newcomers may have worthy ambitions to transform their councils. But reality kicked in on Tuesday. Entering town halls for briefings, one issue became clear: there’s barely any money left to fund even adult and children’s care, which swallows the majority of cash – let alone keep the rapidly shrinking library service running, the leisure and swimming pool afloat, parks and highways maintained.
Countless warnings from respected organisations, notably the government’s own spending watchdog, have gone unheeded by the government. Last year, the National Audit Office cautioned that council financing is unsustainable and that 10% of the larger councils could have exhausted their reserves – which prop up social care – within three years.
It gets worse. The Commons public accounts committee said recently that the government is in denial about a crisis in which councils are overspending alarmingly on social care, while some are courting “greater risks” through property speculation. …
How did we land in this mess? Look no further than George Osborne, the former chancellor, whose parting gift was a wheeze to make English councils almost self-sufficient by slashing central government grants while handing back control of most business rates. Until Osborne’s intervention, rates had been collected centrally, then redistributed relatively equitably, since 1993.
In 2016, the government initiated a “fair funding review” to work out how Osborne’s reforms might be implemented – and it’s turning out to be anything but fair. Why? Because ministers are taking little account of need and deprivation in poorer areas, with a £7.8bn funding gap emerging overall in council finances. Up to now, these areas have been compensated to take account of low tax bases because they have few expensive houses which deliver higher council tax receipts. Furthermore, business rates from run-down high streets generate a pittance in poorer areas compared with thriving city centres in London and elsewhere. No matter: for this lot, inequity is compounding denial.
Something has to give in a system where almost 60% of council spending now goes on adult and children’s social care – although, overall, social care spending is still falling. Everyone in Whitehall and town halls knows that the social care system is in freefall. A review of how it should be funded – locally, or nationally – is promised. So why introduce a new funding system for local government while its largest single service is awaiting a review?
True, some councils – sometimes smaller districts, with no social care responsibility – are plugging gaps in their finances by morphing into de facto property developers, borrowing heavily to buy shopping and office centres to deliver an annual income. In 2017-18 alone, councils spent £4bn on commercial property, in spite of NAO warnings that finances could be “strained” in the event of a downturn.
But radical action is needed. Rob Whiteman, head of the public sector accountants body Cipfa, argues that authorities should have the power to set council tax rates locally, based on up-to-date property values. His call should not go unheeded.”