What now for local government finance?

Could the impact of COVID-19 on local authority finance be the straw that finally breaks the camel’s back for many frontline services already emaciated over the past decade by austerity? APSE Chief Executive Paul O’Brien urges the Government to fully support the services that have been fundamental to local public health and mental wellbeing.

APSE has written extensively in the past about budget reductions which have seen authorities lose 60p in the pound from funding provided to them by Government since 2010. English local government in particular has also seen a significant shift from central Government grant funding; from a general taxation pool to one that is hugely dependent on locally based taxation from council tax and business rates, alongside fees and charges. In 2019/2020, 88% of the average English local councils’ core spending power was made up from council tax and business rates, with a significant part of the rest coming from commercial income fees and charges.

The additional cost to English local government of COVID-19, at present, has been put by the LGA at some £12.8B. Whilst some of this is based on modelling for significant drops in council tax collection rates, business rate yield and the fact that revenue from commercial income fees and charges has all but disappeared, it’s not clear as to whether this fully takes into account the unknown length of the current crisis. So far, English councils have received £3.2B from Government, with appropriate Barnett consequentials passed on to the UK’s devolved administrations. There have also been some short term measures taken to ease cash flow for councils but this is only temporary.

It has been well documented over the past years that many local authorities have been under huge pressure. Following a decade of austerity, the additional gap created by COVID-19 will probably mean that a number of authorities will be forced to issue S.114 notices stopping all non-essential spend. For local economies fundamentally dependent on the public pound, this could prove catastrophic.

What does all of this mean for those frontline neighbourhood services which have already had to deal with the worst consequences of austerity? These huge cuts, compounded by significant rises in demand across council activities, have squeezed the life out of these often non-statutory services.

With the demand for social care budgets increasing considerably in the current period, this will squeeze other frontline services even further. And whilst the public recognise the importance of social care, to many of the most vulnerable and needy people at present, the vast majority don’t experience social care in their daily lives.

APSE’s own public opinion polling carried out with Survation shows that most people really value refuse collection, public realm, parks, roads and street cleaning. It is my belief that this love of the frontline has only been enhanced over the past weeks when these weary warriors have stepped up to the plate yet again and delivered, when everyone else has been placed in a state of suspended animation by lockdown. It would be a real tragedy for local government if this greatly increased recognition of the role it plays in keeping society functioning in the toughest of circumstances is quickly lost by a failure to fund properly these very services in the future. 

These already really scarce resources, which have had to be juggled about in a creative manner over a prolonged period of time, are now eventually being recognised as being enormously fundamental to local public health and mental well-being during the coronavirus crisis.

It is unthinkable that at the other side of this, that the public, who have already seen sharp increases in their council tax bills in recent years, will not be asked to pay even more in taxation to try to rebalance the economy. If they see less and less for their money on the ground, amongst the services they value the most, then public opinion could shift very quickly and will be unforgiving. Government would be well advised to remember this when budgeting for life after the current crisis.

APSE knows that there can be no solution for the frontline that doesn’t deal with the overall funding of councils. We are therefore calling for Government to underwrite fully the funding that local government was expected to receive this financial year from council tax and business rates, alongside the revenues they were dependent on from fees and charges. Additional costs of protecting local communities from the impact of COVID-19 should also be covered by central Government. The Government said they would, it’s vitally important that they do so.

This article was taken from the May 2020 edition of APSE Direct which you can read here.