In conversation with Sarah Pickup, Deputy Chief Executive, Local Government Association

  1. What are the reasons for the current scale of the funding gap?

English councils will have had to deal with £16 billion of reductions to Government grant funding by the end of this decade. Councils are also facing additional unfunded cost pressures such as related to the introduction of the National Living Wage, paying for sleep-in carers. This has left many local services facing significant funding gaps. Services such as children’s services, adult social care and homelessness are at a tipping point. The Government must recognise that councils cannot continue without sufficient and sustainable resources. Even if councils stopped filling potholes, maintaining parks and open spaces, closed all children’s centres, libraries, museums, leisure centres, turned off every street light and shut all discretionary bus routes they still would not have saved enough money to plug the £5.8 billion funding gap it faces in just two years.

  1. To what extent will business rates retention be able to fill the shortfall left by the loss of central government funding?

The LGA remains committed to working with the Government to deliver further business rates retention. We are clear that government must allow the extra income kept by local government – expected to be in the region of £13 billion – to be used to plug the £5.8 billion funding gap by 2020 and the provide the £1.3 billion needed to stabilise the care provider market. Some of the extra income will also have to be used to ensure no authority is worse off as a result of the new fair funding formula. This would remove the option of any new or additional responsibilities being transferred to local government. Business rates retention will not be enough to sustainably fund local services in the long-term. The Government also needs to set out how it intends to further fund councils to meet future inflation and demand for services, such as social care and homelessness, into the next decade and beyond.

  1. What should we be looking out for regarding potential changes to fair funding?

A fairer system of distributing funding between councils is also needed. Over the years, the system for allocating shares of funding has become ever-more complex, to a point where it is difficult to explain how a local authority’s funding levels from the Government are determined. A mechanism that is easier to understand is an important aspiration for any new system. This will aid transparency and accountability, but does not necessarily mean that the formulae must be minimalistic. Fairness should be the primary objective of the redistribution system. We also believe that adjustments for council tax raising capacity should remain an important part of the system. There needs to be a transition scheme which is underpinned by extra funding from Government for those with the sharpest cuts and no local authority should be worse off.

  1. What are the best hopes of local government in becoming financially sustainable?

The way our country has been governed is broken and expensive. A highly centralised control of taxation, budgets and spending priorities, has been inefficient and unsustainable in the context of cuts to public spending. It has shifted costs around the public sector. Over the past couple of years, proposals to provide local government with longer term financial settlements, allow to directly keep more business rates and give councils more flexibility in setting their council tax show government has listened to calls from the LGA to reshape how public services are financed. More can be done and reforms must be supported by a fair and sustainable finance system which makes clear the link between what people pay in taxes and the services they can access, so that residents understand the impact of local decisions on them and their family.