Turning challenges into opportunities

By Jamie Hailstone | 15 November 2017

Even on a good day, the run-up to a Budget announcement is enough to give anyone in the public sector the jitters.

And with the continuing uncertainty around Brexit and questions over how local government will be financed after 2020, not to mention recent events in Westminster, you could be forgiven for thinking the end of the world is well and truly nigh.

But the mood at the recent round table event with chief executives from the Core Cities group, in association with PwC, was bullish about the opportunities ahead. Local government has been sorely tested over the last few years, but it has made it through the wilderness and council leaders are determined to make their voices heard with a renewed sense of confidence.

The event started with an assessment by Professor Tony Travers from the London School of Economics about next week’s Budget.

Professor Travers said he believed the 2018/19 and 2019/20 financial settlements are not going to ‘radically change at all’, as they are ‘set in concrete’ as part of the previous spending review.

‘I think this Budget will beg questions about the medium-term future,’ he told the event. ‘We are moving into a period where clearly the national debate about austerity has changed, partly because of the General Election, but that does not necessarily mean change for local government.

‘The tragic truth is that because local government is innovative and has managed to get through this period without things failing, it is easy to imagine cutting it further,’ added Professor Travers.

‘There is a central paradox that the better urban government has done, the greater the risk it will be expected to do more.’

‘However many National Audit Office reports there are on the failures in national government, nobody in central government ever thinks they are not better at running local spending than people in local government,’ he added. ‘In the end, it is believed in Whitehall that they know best.’

But Professor Travers added because of Brexit there is now an opportunity for cities and city regions to make the case that ‘the way they use money is more likely to produce a better-governed country in which people feel more confident than if it’s all done centrally’.

‘Whatever your views on Brexit, it was not a vote for more power at Westminster,’ he added. ‘I do think out of the pressure on the state at the moment, there is an opportunity for local government to set out the case for what they want. Local government has been a bit ambiguous about wanting too much power, but I do think now is an opportunity for cities to make the case, because they are better at running local services than national government.’

One of the council chief executives at the event admitted there has been an ‘untold story’ about the way local authorities have responded to austerity and the economic growth agenda in recent years.

‘We have successfully saved well over a £1bn of taxpayers money in terms of government grants,’ added the chief executive. ‘We have all achieved growth in that period and driven a lot of increases in job numbers. And it’s been done in an incredibly difficult period of taking cuts none of us would have wanted to.

‘If we were businesses, we would be listed on the FTSE250 and we’d be lauding these amazing turnaround chief executives and leaders who have boldly led the country through this difficult period of austerity, but because it’s local government, we don’t tend to tell that story.’

‘If we were dealing with Brexit, we wouldn’t be creating 10,000 new jobs to run the process,’ said the local government leader. ‘We would be looking at something very different. And we would want to take advantage of the opportunities around on the Industrial Strategy, housing deals and making the devolution agenda work.’

Another participant said local government could ‘ask for more’ and be bolder in a post-Brexit contact, but added ‘we should start by recognising the strength of what we already do’.

‘I think we are in a moment when there’s a lot of energy about where we go next and a lot of evidence about where we can make a difference,’ he added.

One chief executive agreed there was ‘opportunity in the moment’.

‘I think there has to be some kind of recognition that whatever has gone on before, only some of that has worked and therefore there is a lot of incentive in the system to take more risks,’ added the chief executive.

‘In the conversation we’ve just had with the Treasury, we have been talking about stresses and strains on our resources and being a broker that makes a lot of growth happen.

‘One of the things we would like any government to do is stop making strange interventions,’ the participant added. ‘If I can use the example of improving better care, it’s a strange concept that you might incentivise people to do better by taking away their money.

‘We are trying to do flexible, integrated things with our partners in health, but the fragmented system and the accountability barriers within that our causing us some blockages.’

Another chief executive spoke about why the current Whitehall system is not sustainable. ‘Eventually we will get to a point where either the prime minister or a group of ministers will decide that needs to change,’ added the local authority boss.

‘If you look at Northern Ireland, Wales and Scotland, there’s a better way of governing,’ he added. ‘I think the rest of England has to follow at some point.’

‘We have a postcode lottery and people who were born in certain parts of the country have worse chances then people born in other parts of the country. We have to call out the current system and say it’s not a fantastic system. I think Brexit provides that opportunity, but my frustration is that the national debate has been all about the process and the terms of leaving, rather than the fundamental reason people voted that way in the first place, which we’re all dealing with on a day-to-day basis.’

Prof Travers commented that the civil servants responsible for Brexit are ‘delivering a policy, which many of them think will damage the country’.

‘The impact on their self-confidence in doing this will be profound,’ he added. ‘In that sense, there is an opportunity.’

One chief executive said he believed an ‘invisible tipping point’ is coming, when councils will no longer be able to protect ‘investment, prevention and growth-supported’ services.

He said councils are now looking to cut back on those services and added any impact would be ‘invisible in the short term’.

‘The impact will be visible in two or three years time, with greater demand for services,’ the chief executive explained. ‘The message we have given to Treasury officials is be mindful of the invisible tipping point.’

The issue of budgetary pressures brought the discussion to the perennial question of whether a local authority could ever go bankrupt, which Prof Travers rejected.

‘The director of finance will ensure that on the last day, there is a still a pound in the bank,’ the academic insisted. ‘However, that’s not the same as providing services. It will be a breakdown of services, not bankruptcy.’

Another chief executive commented they believed the question of statutory services versus innovation is ‘fundamental’.

‘One of the things that excellent local authorities manage to do is accommodate both, day in and day out,’ added the participant. ‘It requires a very different skill set to do that and it has to be underpinned by transparent corporate governance. You have to explain to the public every step of the way what you are actually doing, which is a good thing.

‘The point is there are very few organisations that have to accommodate all those skillsets, explain it publicly and do it in a political environment. That is a remarkable combination of approaches.’

And another participant said businesses are now looking to councils to create ‘the certainty of place for them’.

‘When you are facing such an unsettled time in terms of central government policy and Brexit, you need actors on the ground who can work with businesses in a quick and agile way to respond to what may be a rapidly-changing situation,’ commented another.

‘We know Whitehall does not have the ability to do that. I think a lot of us saw through the financial crisis that local government can directly intervene in the local economy in ways that would not have been possible centrally.’

As the discussion drew to a close, the participants were asked if they believe government ministers are receptive to their case.

One person commented they had met chancellor Philip Hammond recently and he is ‘someone who wants regional economies to work’.

Another chief executive said there are ‘two good conditions in place’ in Whitehall. ‘There’s a chancellor who believes in city-based growth and there’s a secretary of state at BEIS, Greg Clark, who was an ally of this agenda in his previous incarnation [at the Department for Communities and Local Government]. We have those two pillars in place, it’s whether they exert their demands in the wide space between them in Whitehall.’

With a week to go before Philip Hammond delivers his next Budget statement, many in local government will be hoping the chancellor is ready to seize the day and give the sector the freedoms and flexibility they have been calling for.

Round table attendees:

John Mothersole – Sheffield City Council

Chris Henning – Nottingham City Council

Joanne Roney – Manchester City Council

Rebecca Heron – Manchester City Council

Stella Manzie – Birmingham City Council

Tom Riordan – Leeds City Council

Helen Dickinson – Newcastle City Council

Jonathan House – PwC

Diane Chan – Core Cities Group

Chris Murray – Core Cities Group

Will Mapplebeck – Core Cities Group

Professor Tony Travers – LSE

Heather Jameson – The MJ (chair)

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