National politics vs Local government: the issues

Council budgets are being squeezed by national agendas

National party politics is undermining the financing of ALL councils, including our own. The problems are not confined to one party (BBC analysis), but the problems are currently most exposed in Conservative councils. These councils are not immune to the national cuts, but nonetheless feel obliged (presumably by loyalty) to try and fit a square-peg-into-a-round-hole. Sooner or later something 'gives'. Here is a summary of the key evidence of how local democracy is being distorted by competing national party agendas.  

2017: Northamptonshire Council goes 'bust'. Services cut to statutory minimum
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Conservative MP, Andrew Lewer, told the Guardian that "lessons must be learned" from the Collapse of Conservative Northamptonshire Council.  (Councils don't strictly go 'bust' - they issue 'section 114 notices'. )

 

This was the first such collapse in a generation, and led to huge cuts in services.  The Council had to sell its newly built £64m HQ. There was an immediate ban on spending and even cuts to children's services.

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Conservative Council Leader: "You cannot win if the machinery of government turns against you

The (then) Conservative Leader of the Council, Heather Smith described the relationship between local councils and fellow Conservative MPs in worrying terms, saying there had been "vicious attacks by four local MPs", and adding "you cannot win" if the "machinery of government turns against you". 

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National Audit Office says Northamptonshire is far from the only council at risk.

The National Audit Office have warned that many councils are under severe pressure:

"Non-social-care budgets have already been reduced substantially, so many authorities have less room for manoeuvre in finding further savings. The scope for local discretion in service provision is also eroding even as local authorities strive to generate alternative income streams. The current pattern of growing overspends on services and dwindling reserves exhibited by an increasing number of authorities is not sustainable over the medium term"

One in ten Councils will have exhausted their reserves in the next three years.

One in ten Councils are raiding their "rainy day funds" to cope with the austerity cuts (see graph below). This is primarily overspends on adult social care. The national audit office said that 15 councils are at a similar risk to Northamptonshire. a BBC analysis showed that most (but not all) of the Councils at risk are Conservative.

And the Local Government Association warns that there are more cuts to come, with half of all councils "at breaking point" being actually forced to hand money back to government: 

"Almost half of all councils - 168 districts, counties, unitaries and London boroughs – will no longer receive a penny of this government funding by 2019/20. Instead, they will actually have to give some extra business rates income back to the Government." (LGA)

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Economists agree. More Councils are at risk

Speaking to the BBC, Professor Tony Travers of the London Schools of Economics said that ""It won't just be Northamptonshire, but they are the council that has got nearest to the precipice as it were so far."

The graph shows Councils suddenly burning through reserves.

Are Councils too beholden to national politics? "devolve the axe"!
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Don't Councils have power to raise money to plug the shortfall?

Not a million miles away - in Surrey to be precise - they tried that.

National cuts had forced Surrey to virtually exhaust the largest council reserve in the country - £100m. 

 

In 2017 Surrey Council (Conservative) proposed to use existing powers available to it to hold a referendum. This would have put up Council Tax by 15% to ensure financial stability going forward. 

The referendum never happened. Instead Surrey was invited to take part in a new business rates "pilot" scheme to keep more of its income. (Independent)

It has been reported that more councils around the UK will be able to take part in these preferential pilot schemes to avoid referendums. Shouldn't all councils have access to this 'pilot' ?

Oh, and Councils make things worse during election years.
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OK, so maybe its predictable, but analysis from the Local Government Chronicle shows that Councils do indeed hold down taxes in election years. 

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Councils are also making the problems worse, by risky property trading

Less predictably, most people are probably unaware that Councils are taking on "unecessary or unquantified risk" at an "accelerated" pace (CIPFA). Many are buying land and property, with "unprecedented amounts" being spent on commercial trading.

CIPFA’s code and the government’s Statutory Guidance on Local Government Investments were “very clear that local authorities must not borrow more than or in advance of their needs purely in order to profit from the investment of the extra sums borrowed

RBWM - cashflow and debt. July 2018 report
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This graph is taken from the July 2018 budget monitoring report.

Debt will rise by £60m over the next six months. 

No report has highlighted that RBWM is at financial risk to date. Investments may be justified. However, against the background set out above, and an unbalanced Council with 48 Conservative Councillors, we at tBf will be looking carefully at the implications of this acclerated borrowing.

 

The Local Government Association "peer review" did state that solid finances were predicated on the "Borough Local Plan" being found sound by the Planning Inspector. However, that hangs in the balance, as three QC's have given written opinions that the plan is unsound, and cannot be retrospectively modified. 

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