Local government has been fraying at the seams for some years now. In 2018, Northamptonshire County Council issued a section 114 notice – the first local authority to do so for 20 years. Since then, Slough, Croydon, Thurrock, Woking, Birmingham City and Nottingham City have issued notices.
The drama continues. Just last week, the Director of Finance at Wirral Council announced that he could not see how the Authority can balance its books. The month before, the Leader of Shropshire Council was on the air waves warning it was likely to go under facing a growing social care black hole.
The relationship between central and local government has been dysfunctional for many years. Cost pressures on service delivery have been left unaddressed and the funding settlement, heavily centralized, encourages strange behaviours.
Take Woking. Reading the recently published Grant Thorton report makes for a depressing read. As cost pressures rose, the Council leaned into special purchases and cheap debt facilities to diversity its income streams. Its borrowing leaped from £400 million in 2017 to an eye watering £1.8bn by August 2022. There were over 24 arms length companies set up in and outside the Borough but no Corporate Plan or strategy to try and thread these efforts together.
Meanwhile, in London, Tower Hamlets is about to go back under special supervision as the Government ramps up the pressure on the Authority’s governance and leadership. Desperate times, and these have been desperate times for local government, call for desperate measures. Central government grant funding for councils dropped by 40 per cent in real terms between 2009-10 and 2019-20 (from £46.5bn to £28bn). Without a sustainable funding settlement more Councils will go down.
In December last year, research by the Local Government Association revealed that almost 1 in 5 council leaders and chief executives think it is very or fairly likely that they will need to issue a Section 114 notice in the next two years. If this Government is serious about growth, it needs to be serious about local government reform. This doesn’t mean necessarily more money but it does mean a restructure which makes growth pay and rewards Councils for managing growth sustainably and that doesn’t mean binging on cheap debt.
Currently, the odds are stacked against them. The politics of planning rarely rewards Councils and only really works where there is political stability. Meanwhile the centralised nature of funding means much of the cash is sucked to the centre.
The last time funding was looked at seriously was back in the Blair years when Sir Michael Lyons was ushered in to try and work towards a more sustainable settlement. Since then, there has been policy drift with stop starts around social care, sticking plasters on funding settlements and aborted town planning reforms. Let’s hope this Government uses its majority to put some big brains into bringing this back into focus.
