While a bit of extra money is always nice for the little luxuries in life, not many of us would rely on a few pounds extra, here and there, to support our mortgage repayments. It is the guaranteed money in the bank that we rely on for the staples in life. For many years this was the case with council finances; while some areas have always had their fees and charges, which certainly helped budgets, the reliable income came from Government grant, council tax and business rates.
Fast forward to a decade of austerity and council innovation in generating extra income has become an essential part of budgets, just as much as business rates and council tax – this income is making up for the loss of Government grants.
The National Audit Office found funding for local authorities fell by over 49% from 2010 onwards, equating to a 28.6% real-terms reduction in ‘spending power'. Research by the Association for Public Service Excellence (APSE) and New Policy Institute (NPI) finds there is also heavy reliance on income to support frontline neighbourhoods' services, which have lost billions in recent years, but make up to a third of council expenditure. The income is no longer pocket money. Estimates suggest it accounts for upwards of 22% of council expenditure.
Government has suggested a ‘spend now, pay later' approach with promises of councils being able to recover the costs of COVID-19. But how do we define costs?
The straightforward additional expenditure is fairly easy to establish: the cost of extra support to the vulnerable, welfare, social care – even the cost of personal protective equipment (PPE) for frontline staff, where its available. However, loss of income raises some pertinent public policy issues.
Arguably, Government has been somewhat duplicitous on the whole issue of councils raising money, but they have been left with little choice. The low-hanging fruit of service rationing, transformation, digitalisation and more have all been enthusiastically grasped, but the tipping point of some services becoming unsustainable was quickly reached. This has led to tensions between councils and Government.
Councils have been enthused by options to raise money through assets and investments, yet Government started to wag its finger, telling councils to limit their exposure. Councils also raised money through seemingly less risky ventures – car parks, festivals, trading activity within local economies. Government again called these earnings stealth taxes calling for them to be cut or culled.
Meanwhile, facing in the other direction, the Governments' Janus face promised to reward those councils that were able to be entrepreneurial, encouraging them to cut the needy apron strings on central Government finance.
So, we now face a crossroads in council finances. Will the Ministry of Housing, Communities and Local Government (MHCLG) have the stomach to patch up the lost income facing councils as a result of COVID-19? If that income loss is as a result of a downturn in financial markets, with the subsequent drop in values on assets and investments, we rather suspect that the answer will be no. Like one of those warning advertisements on the radio, councils may face a stark reminder that ‘the value of investments can go up as well as down'.
In other areas, such as the lost income from car parks, or traded services to schools, the Government must not be found to be treating councils differently to private businesses who have been offered unprecedented support to enable their survival.
While we may mourn the loss of many jobs and businesses, our local residents will not suffer from the loss of a Cath Kidston handbag printed with cute dogs, in quite the same way as the immeasurable impact on our communities if local government's frontline services are left to flounder in the wake of COVID-19.
This pandemic has recalibrated the public values as to what matters. Suddenly parks and care homes are the headline news. So too, cemeteries and crematoria and of course, the binmen.
Who among us just a few short weeks ago would have imagined residents placing rainbow thank you notes and cleaning wheelie bin handles to safeguard these oft forgotten workers? Essentially, we cannot bail out businesses and fail to bail out the frontline. Councils may not get the glory of the NHS but they matter. They have fed the poor and vulnerable, buried the dead and kept communities safe. Communities secretary Robert Jenrick must urgently reassure councils that fairness will prevail when we emerge from these testing times.
Paul O'Brien is chief executive of APSE
