Nick Rushton: Councils’ funding gap must be faced by the new Prime Minister – or we risk suffering at the ballot box.

Counties are the most exposed to financial pressures, but the least resourced to deal with them. Rural residents are getting a raw deal.

Cllr Nick Rushton is the County Councils Network finance spokesman and the Leader of Leicestershire County Council

Uncertainty is the only certainty at the moment in Westminster: it is unclear who will be the new Prime Minister, and it is unclear who will make up a new government and what its domestic priorities will be.

It is also glaring that not one of the 10 candidates for the top job in the land has mentioned local government. That must change.

That uncertainty is projected onto us in local government. The current upheaval means that it is unlikely we will see a Spending Review this year, or the planned reforms to local government finance implemented next year.

If this comes to pass it will be bitterly disappointing, however extenuating the circumstances. Next year will be ten years since austerity began. There is a desperate need to reform a broken local government finance system in the fair funding review, and for the Spending Review to address the pinch areas.

Faced with unprecedented financial pressures, councils have shown how it has been just about possible to cope with austerity, transforming services and doing more for less. In a sense, austerity has shown the best of local government – we have done more than any part of the public sector to restore the finances of this country whilst maintaining services, despite cost and demand increases.

But so far we have had nothing in return and the truth is that the elastic can barely be stretched much further.

Last month the County Councils Network (CCN) released a new report with PricewaterhouseCoopers (PwC), which looks at the challenges facing councils in a different way.

There has been plenty of analysis of the sustainability of funding in local government in recent times, but most has narrowly focused on who has suffered the most from reductions in funding. Instead we should be looking at what resources councils really need to provide services.

PwC’s analysis for CCN, one of the most detailed to-date, does precisely this – projecting spending need and the ‘funding gap’ facing local services up to 2025.

The headline results are stark. If no extra funding is made available, councils in England will face a £51.8bn cumulative funding gap that must be filled by 2025. This falls to £30.2bn if councils put their council tax up by a further 2.99 per cent each year for the next five years.

To fill the rest of this gap, most of us in local government, particularly in counties, will be left with unpalatable choices. Pressures on children’s services, notably funding for children with special needs and disabilities, are increasing daily. It is no use government spokesmen saying that spending is at record levels when it takes no account of demand, mostly brought about by legislation. There will be further charges simply to preserve existing services, especially in adult social care, and increasing reductions in library and recycling centre services, road conditions, streetlights, and youth and school transport.

Whilst this sounds like a race to the bottom, it is a situation facing even the most well-run councils and it omits another hugely significant need for funding, which is not yet getting the attention it deserves. In Leicestershire, population growth alone over the next 25 years is estimated to cost us an extra £600m to finance the necessary roads, infrastructure, and schools. Of course, we are not alone. Unless the government recognises this and respond appropriately, its central ambition to drive housing and economic growth will stall.

Importantly, the analysis from PwC confirms what many of us in England’s counties have known for a long time: counties are the most exposed to financial pressures but are the least resourced to deal with them. Whilst all the time giving rural residents a rawer deal than those living in other parts of the country. In total, the 36 county authorities in CCN membership make up 41 per cent of the total funding gap (£21.5bn) facing all councils in England.

Due to historic underfunding of county areas, we have less ability to preserve highly-valued services compared to other areas of England, most notably London. The report demonstrates that over the past four years, if London had been providing a level of service more comparable to other councils, it would have had a funding surplus. Conversely, CCN councils have around £1bn of ‘unmet need’ in their historic expenditure. That is not to say that the capital has not faced financial challenges – of course it has. And it is not to say that councils in London do not have specific cost and demand pressures, but their funding compared to counties (councils in London currently receive 64 per cent more per person) has allowed them to deliver a more substantial local service offer.

Therefore, the government’s fair funding review simply has to take place. There will have to be some transitional funding but it must, without fear or favour, address a broken system of financing local authorities.

Conservatives have always prided ourselves on low tax and high quality services. But if all we are offering is yearly tax rises and service reductions, it is probable we will be punished further at the ballot box. Contrast the county elections of 2017 where we won a significant number of seats and councils, to how well the party performed last month. Unless we set out an ambitious offer for residents, we risk losing voters in our heartlands.

The plight of local services must be on the mind of the next Prime Minister when it comes to the domestic agenda in England. It is imperative that the Prime Minister and new ministers talk to us – we are, after all, their base both in terms of the leadership election and for the party as a whole, especially after last month’s election results. Conservative Party revival and renewal always starts via local government.

We look forward to hearing the new government set out its vision for local authorities in the debates over the next few weeks, when we must continue to press the case for sustainable and fairer funding.

Nick Rushton: Financial independence would allow councils to talk not of survival, but of real ambition

We can offer so much to the nation. Growing our local economies in a post-Brexit landscape; genuinely integrating health services; ensuring that we build the homes and infrastructure we need.

Cllr Nick Rushton is the Leader of Leicestershire County Council and the finance spokesman for the County Councils Network.

We begin 2019 in the same vein that 2018 ended – with Brexit dominating the national discourse. With all the noise from Westminster, you would be forgiven for forgetting what a crucial year this is for local government.

As we enter what could be a defining moment for our sector, there is little doubt that councils start 2019 in a much better shape than we could have hoped for several months ago; with the government making a series of interventions last year to provide some new resources.

The County Councils Network (CCN) had clearly argued the need for the government to provide this resource, and these welcome announcements show that the current crop of ministers are acutely aware of the financial pressures upper-tier local authorities are facing. They are rightly listening to the pragmatic voice of Conservative county authorities.

The decision to be so vocal at a time of national instability has not been taken lightly. However, it reflects the reality of significant funding pressures for many upper-tier councils, eight years after necessary measures were taken to reduce the national deficit.

Local government has done more than any other part of the public sector to restore the national finances of this country; with councils facing a 40 per cent cut in their budgets from 2010 to 2015, with even sharper reductions in the following years.

Many, including my own authority, generated efficiencies by taking difficult decisions early and fast to protect services for the vulnerable and elderly, providing us with a platform to innovative and transform services, delivering more for less.

Counties have done everything that was asked by successive Conservative governments, delivering billions in savings to the Treasury, and using our reserves prudently to protect frontline services.

But with demand, particularly for care services, far outstripping a dwindling pot of funding, the positive news last year does not alter our long term financial challenges. Nor does it eradicate our concerns over how resources are currently distributed between councils. Therefore, this year’s spending and fair funding reviews are so important for county authorities across the country. They offer the opportunity to secure the required uplift in funding for all local government, to reform existing funding streams, and crucially, to ensure that funding for councils is distributed fairly to meet today’s real needs and secure value for money.

Counties suffer the most from the current system of funding councils that is unfair, outdated, and opaque. Much is made of counties’ higher council tax base, suggesting that this has given us an unfair advantage and shielded us from funding reductions. However, the reality is that residents in county shires are left to pay more for less, whilst subsidising services in other parts of the country. It cannot be fair that someone who owns a terraced home in Hinckley in Leicestershire is paying roughly double that of someone who owns a multi-million-pound dwelling in Westminster.

Counties’ “core spending power” – which includes council tax income – is £820 per person, smaller than metropolitan boroughs (£885), and far less than inner London’s ability to spend £1,044 on council services per resident. Moreover, the cut in government grants for counties over the last four years stands at a 42 per cent reduction – higher than anywhere else and almost double that of inner London (25 per cent).

No one is arguing for complete equality in funding, nor that council tax should be the same across the country. But the current system rewards higher spenders, while penalising lower spenders. It bakes in higher service levels, while failing to recognise unmet need. And it incentivises councils to have low council tax in exchange for more generous funding.

In addressing these fundamental flaws, we believe the government’s direction of travel is promising, and most importantly, justified. The latest consultation on the fair funding review outlines a simpler formula, more responsive to population levels and demographics. It contains important proposals to rectify our concerns that key services in shire counties, such as concessionary fares, local bus support and home-to-school transport, have been poorly funded compared to urban areas, while proposing a better methodology to recognise the increased costs of delivering services in rural areas.

And it sets out a fairer approach to considering local council tax levels in determining funding allocations, and rightly asks the question whether income from parking should be considered in calculating councils’ funding. But for all these positive developments, the adult social care and children’s services formulas remain somewhat of a ‘black-box’ with little detail so far on whether these formulae will genuinely respond to counties’ demographic and demand pressures across these services. This is concerning, with 65 per cent of counties’ expenditure in these two service areas.

Whatever these formulas do produce, securing additional resources at the Spending Review for adults and children’s social care will be essential. CCN has never been under the illusion that the fair funding review alone can solve the financial challenges facing local government. But neither are we arguing for a Conservative Treasury to offer us a blank cheque. More can be done to make services – and council structures – more efficient.

Reforming funding streams such as the community infrastructure levy and new homes bonus will help support sustainable housing development and ensure funding goes to the right councils to support growth and infrastructure. Giving councils more freedoms over local taxation will incentivise us to promote growth and take local accountable decisions.

Implementing 75 per cent business rates retention is an important start. But the spending review should go further by signalling more fiscal freedoms and the end to the council tax referendum policy if government wants councils to truly take back control of their financial destiny.

By implementing necessary reforms at the spending and fair funding reviews – balancing risk and reward with fair and sustainable funding – we need not only talk of survival, but of real ambition.

Properly-resourced county authorities can offer so much to the nation: growing our local economies in a post-Brexit landscape, genuinely integrating health services and re-shaping care, and ensuring that we not only build the homes the country desperately needs, but that we build sustainable communities with the necessary infrastructure following development.