Thespians are well known for their fear of the name Macbeth. Should someone utter it, the culprit must exit the theatre, spin around three times, spit, curse and then knock on the theatre door to be allowed back in. The correct form is to refer to “the Scottish play”. For council finance officers, the current equivalent is to utter a reference to “Croydon.” Best to protect sensibilities by reference to “a certain south London borough.” Croydon Council has not actually gone bankrupt – neither did Northamptonshire. But it is facing a struggle to balance its budget and thus avoid the men from the Ministry swooping in to take charge. Thus we have a Labour council, a Labour council, obliged to introduce what The Guardian describes as “drastic cuts.” Other councils – especially those who undertook imprudent investments in commercial property – are anxious to avoid getting into the same position.
Thus the Spending Review, which Rishi Sunak, the Chancellor of the Exchequer, delivered on Wednesday was listened to with particular interest by decision-makers in local government. I have spoken to several Conservative council leaders to gauge the reaction. They included district, county and unitary leaders from north and south. One caveat was that they tended to be waiting to see the “small print” – specifically details of what funding individual local authorities will get when the grant settlement is revealed next month. But there was a favourable reaction to the broad headline announcements. The Chancellor said:
“Local authorities will have extra flexibility for Council Tax and Adult Social Care precept which together with £300 million of new grant funding gives them access to an extra billion pounds to fund social care.”
Looking at The Treasury documents this turns out to mean that “upper tier” local authorities, that do most of the spending, will be able to increase Council Tax next year by up to five per cent – without needing a referendum. That is well above inflation (which is currently under one per cent). The distinction between Council Tax and the “Adult Social Care precept” is illusory – even more so than the distinction between Income Tax and National Insurance. It all goes into the general pot, not a special fund. Nor do councils have to impose either element of Council Tax increase. Some try to imply otherwise with references about applying the “adult social care precept on behalf of the Government”. The Government tends to be indulgent to misleading references of this nature.
Whatever bureaucratic locutions are resorted to, some of the council leaders I spoke to were nervous that people would still notice if their bills were pushed up. One council leader in the south said she would “probably” increase to the maximum allowed, but was nervous about the backlash:
“It’s shifting responsibility to us. It’s allowing us to raise more money. We can’t complain about that. But it will not be an easy decision. Many people are losing jobs. You have households that used to have two incomes coming in with only one. We have people taking wage cuts. The self-employed being hit. For Conservatives putting up the Council Tax is not something we like doing anyway. But if households incomes are rising they shrug it off. But if the family budget is already being squeezed there is more resentment. The alternative would be some difficult choices that would involve scaling back what we do.”
The public sector pay freeze will help. One county council leader from the north said:
“The payroll is a huge cost. We had budgeted for a two per cent increase. So a freeze will make a big difference. That’s more important to us than the extra flexibility on Council Tax – which I will try really hard to avoid using, anyway.”
One of the grim consequences of the lockdown has been an increase in the number of children in care. Domestic violence has increased and thus the “safeguarding” requirement for children to be taken from their families. This has huge financial implications. One council leader told me:
“If people thought about the full picture there would be much more opposition to lockdowns. The full consequences are not appreciated. I do get angry about it. We are trying to do more with early intervention. Once children are in the care system it’s very difficult. Placing them for adoption is very slow if it ever happens, there are all these bureaucratic obstacles. Sort of institutional resistance. The alternative of putting the children back with their families is dangerous. So they just get stuck in care.”
Even when coronavirus is eliminated there is some doubt as to what being “back to normal” will mean. One London borough council leader said:
“The statement did give some recognition that the problems won’t all disappear in April. That there will be an impact for a few more months. But if it is long term, I ask myself if our parking revenues will ever get back to normal. With the Council Tax revenues if people lose their jobs then it gets paid in benefits. What’s more difficult for our finances are the people who are still working but struggling. Quite a few have cancelled the direct debits and just paying when they can afford to.”
Another council leader was preparing to “go into battle” with his finance officers to resist increasing the Council Tax by the full amount:
“I will be told that if we don’t increase the Council Tax then the base will be lower which will restrict the amount of extra cash we can raise in future from these limits in percentage increases. My counter to that is that we have been increasing the number of homes and are due to do so further.”
All those I spoke to welcome the Chancellor “new Levelling Up Fund worth £4 billion.” Sunak explained that:
“Any local area will be able to bid directly to fund local projects. The fund will be managed jointly between the Treasury, the Department for Transport and the Ministry of Housing, Communities and Local Government – taking a new, holistic, place-based approach to the needs of local areas. Projects must have real impact. They must be delivered within this Parliament. And they must command local support, including from their Member of Parliament. This is about funding the infrastructure of everyday life: A new bypass. Upgraded railway stations. Less traffic. More libraries, museums, and galleries. Better high streets and town centres. This government is funding the things people want and places need.”
A council leader from the Midlands told me:
“I do like the approach of allowing local decisions on what transport improvements should be a priority. We don’t need devolution – with extra layers of metro Mayors or whatever. We need decentralisation to the local government already in place.”
Just one sour note was struck – from a “red wall” area:
“If it’s a ‘Levelling Up Fund’ then how come any council can apply? Is money from the ‘Levelling Up Fund’ going to be spent in Surrey? It’s ridiculous.”
Expectations are important. The message I got was that though the Chancellor’s help was significant there was still a shortfall that they would have to cope with. But then they never imagined that he would pick up the whole tab for the pandemic. The consensus among council leaders is that they have been left with a difficult challenge – but not an impossible one. Should they need inspiration, they can look at what has happened in Croydon should they fail.