Urgent Devolution Needed to Make English Local Government Sustainable

English local government and the services it provides are no longer sustainable in their current form, an independent commission is warning.

The group of leading economists, business, finance and public service experts argue that an urgent devolution of powers, funding and taxes to groups of local authorities is required to save public services like adult social care from collapse.

The Independent Commission on Local Government Finance publishes its final report, Financing English Devolution, today (Wednesday).

It argues that the future of local services is dependent on local authorities becoming largely self-sufficient and less reliant on central government.

Further government cuts to funding for services such as adults and children’s social care, police, fire and culture are expected in the next parliament, while demand on many of these services is expected to continue to rise. The commission believes some services will struggle to survive if local areas are not given the freedom to determine their own priorities and how they pay for them.

The Commission has set out plans for a 10 year programme of devolution that would see more than £200 billion in annual public expenditure being controlled by groupings of local authorities. Under the plans, Whitehall and Westminster would have a much reduced role in local services like housing, planning, social care and transport and local government funding.

The Commission urges that pioneer areas – such as well-established combined authorities – take on new freedoms now, with reforms rolled out to other areas over the next 10 years as they become ready.

Key reforms include greater freedom over jobs, housing and care, a single budget for public services in an area and a devolved model of taxation based on new arrangements for Scotland. This would include reform of council tax and business rates along with devolution of some existing national taxes like income tax and VAT.

Darra Singh, Chair of the Independent Commission on Local Government Finance said:

“Local government and the services it provides are on a cliff-edge.

“Councils’ success at implementing cuts over the past few years has shielded people from the stark reality that the services they use can’t carry as they are for much longer.

“The urgent need for reform is going to be one of the biggest and most important challenges facing the next government. Without it, many of the key services which have been part of everyday life for generations may not be there much longer.

“Nowhere is this more evident than with adult social care, which is facing financial crisis with minimal scope for further efficiencies. Money available for care is going down at the same time as demand is going up.

“The need for English devolution has been acknowledged by all of our major political parties. We have concluded that devolution and reform of the local government finance system must go hand in hand.

“This Commission has set out a path to English devolution which we believe is the only way to save public services in an era of reduced public spending and rising demand.

“It is clear that if we want local services to survive and support a thriving national economy, a radical devolution of powers, funding and taxes to local areas is urgently needed.”

Responding to the report, Lord Best said: 

“As this report makes clear, devolution from central to local government is not only desirable, it is essential. 

“To build the housing the country needs, provide the quality of care that our elderly deserve and support businesses, it is clear that local authorities need much greater freedom from central government. Reform of the way that local government services are funded is a vitally important part of that.

“This report from the Independent Commission on Local Government Finance sets out a sensible and workable approach to devolution. It should be essential reading for this and the next government.”

RECOMMENDATIONS

For areas, like established combined authorities, ready to take on new freedoms now, the Commission calls for:

Greater freedom over jobs, housing and care. Government should develop additional freedoms to boost economic growth and increasing housing supply. This should include the freedom to develop new ways of integrating health and social care. It should also include councils and Local Enterprise Partnerships taking on the entire responsibility for further and adult education, skills and apprenticeships, regeneration and employment support.

A single budget settlement for each area. This would mean combined authority areas being given all of the funding for public services including health, education, policing and council services which would then be spent according to local priorities.

Council tax reform. Local areas should be given the freedom to determine the number and value of council tax bands and when properties are revalued. The current system, based on 1991 prices and nationally set bands, lacks credibility and fairness and exacerbates housing problems by forcing local authorities to levy taxes which are disproportionately low in some areas and disproportionately high in others. The commission also urges the next government to scrap council tax referendums and give councils the freedom to set their own discounts.

Devolution of national taxes. The funding of locally delivered services should resemble the Scottish model. Local government should be funded through a combination of council tax, business rates, government grant, a portion of existing national taxes like VAT or income tax and some newly assigned taxes such as stamp duty, tourism taxes or airport taxes.

Local Public Accounts Committees. These should be established in areas which take on these new freedoms to scrutinise value for money for all public services.
The Commission also sets out recommendations for all areas which it urges should be applied to all areas now. These include:

The creation of a new independent funding body. This would carry out an urgent review of local government’s sustainability before this year’s spending review and would advise and scrutinise government’s distribution of funding to local areas.

Business rates reform. The business rates system should be localised in its entirety in the next 10 years, with the retention of 100 per cent of business rates, including business rates growth by local government. As part of its review of business rates, government should consult on options for localisation of business rates relief.

Multi-year settlements. The government which takes office in May should introduce full and clear multi-year settlements to enable effective long-term planning for local authorities and other public services.

Raising additional revenue. Councils being given the freedom to determine fees and charges locally is seen as vital to a number of council services being sustained.

View the Final Report

ENDS

CONTACT: Simon Ward, Independent Commission on Local Government Finance, 020 7664 3333

NOTES TO EDITORS

The Independent Commission on Local Government Finance was set up in June 2014 and has been tasked with making recommendations for the reform of local government finance and finding better ways to fund local services and promote economic growth in England.

Its recommendations will be presented to all of the main political parties with the aim of shaping the debate on the future of local government finance and influencing the next government.

The Commission was established by the Local Government Association (LGA), the national voice of local government, and the Chartered Institute for Public Finance (CIPFA), the professional body for public finance professionals. Its views and recommendations are independent of those two organisations.