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Masters of their own fiscal destiny? Local government UK

Masters of their own fiscal destiny? Local government UK - LG November 2016

Councils in the UK are getting a major shake-up and new models emerging for future funding, roles and relationships with central government. SOLACE president Mark Rogers answered questions at the SOLGM Summit in Auckland recently.

Mark Rogers is president of the UK’s Society of Local Authority Chief Executives (SOLACE) and chief executive of the City of Birmingham. At the 2016 SOLGM Summit he joined a panel of speakers from sister organisations in Canada, Australia and New Zealand to outline his country’s local government challenges.

What has, and what will, local government in the UK do to address government funding cuts and other austerity measures?

Mark Rogers We’ve been dealing with austerity measures since 2008 / 2009 and we now see austerity as permanent. It needs to be seen in terms of the mix of funding that local government receives in the UK. We have four sources of revenue: we get government grants; we raise local taxes, called council taxes, which are basically a property tax; we can raise income; and we get a percentage of business revenue that’s collected locally.

Since 2008 central government has effectively been phasing out its grants. Not every council gets the same percentage of its revenue via grants but at Birmingham City, where I work for example, more than half of our income stream had been through government grants. So phasing that out has been a big deal for us.

In general, local government has been addressing these pressures in four ways.

1. The big agenda that’s taking over from our obsession with austerity is our obsession with devolution. There’s a very strong dialogue with national government now about the powers and the funding that it is prepared to relinquish. There’s a big drive towards devolution, particularly around what’s called fiscal devolution – the ability to raise taxes locally over and above the council tax in order to provide substitute funding.

So the first big response to austerity has come in the form of a challenging debate with government on the terms under which it is prepared to give up its control over our financial destiny.

2. Ever since the funding cuts started to kick in we’ve had to reshape local government. We’re moving away from a predominantly service-based model where we have continued for many decades until recently to deliver endless services to local residents. We’re now becoming more like commissioning organisations where we do less and less direct service delivery and more commissioning or co-commissioning with partners, getting third parties to provide services on our behalf.

We have much more focus on community engagement and activism. Some would see that simply as a means of substituting local government funding for free activity by communities – and there would be some truth in that. Hand in hand with becoming a more commissioning organisation, there are things that communities can do for themselves that they haven’t previously done.

3. We’re thinking much more about whole systems. In the UK local government is constantly in a tussle with the National Health Service which is run through London. Increasingly, we’re seeing that the only way to save money around people’s health and social care needs is to bring the two systems together to try to be much more efficient in the commissioning and delivery of services to residents.

4. Finally, SOLACE is really focused on what kind of leadership is needed to effect these sorts of changes. How do you lead in a world of austerity, for example, where you’ve got less control or even influence, and when you’re trying to work in complex systems – not in individual institutions?

Are we really clear about the purpose of local government going forwards? What’s local government for? What kinds of values underpin our public service approach? What do we bring to the table by way of public service ethics?

Increasingly for me, the most important point in all of this is in changing the narrative away from cuts – with phrases like the ‘jaws of doom’ and ‘the end of local government as we know it’ – to ‘actually, so what?’

I run a council that’s still got a £3 billion [about NZ$6 billion] budget. What are we doing with that money that still helps deliver our priorities and makes a difference for residents?

Or for that matter, what can you still do with £180 million if you’re a small borough like the one I used to work in called Solihull.

It’s no good whinging about cuts, because residents don’t give two hoots about local government’s problems.

What lessons have been learnt to date and what advice would you give to other countries?

The most interesting piece of advice that local government offers – and politicians would say they’ve learnt – is that there was far too much poorly-targeted and poorly-used money in the system before austerity kicked in.

In the late ’80s, all of the ’90s and into the first part of the 2000s, successive governments had found it possible to put more and more into initiatives to help with their policy agendas. But these initiatives were short-term, grant-led, difficult to sustain and often ill-thought-out.

During the first half of austerity – from around 2009 through to around 2013 – whilst we complained bitterly, and some of what we had to do was difficult, actually the impact on front-line services was negligible because a lot of money got taken out of such initiatives.

Then we spent a lot of time doing things you’ve talked about in New Zealand around shared services and consolidating back offices across organisations.

So the first lesson we learnt was you do need to spend your money really carefully. We had too much loose money rattling around in the system and it wasn’t delivering particularly effective changes to outcomes.

However, as we tip into long-term austerity, what our government has done very little of – and what local government has found very difficult to do because of its small scale – is an impact assessment of the reduction of funding.

The reduction in local government funding has run alongside national changes in welfare. Yet we have a very poor understanding of what difference that reduction in funding is really making on the most challenged communities.

There’s a lot of rhetoric about that – particularly a lot of political rhetoric. But we have a really poor understanding of the difference, either positive or negative, that the withdrawal of funding is making to public services. That’s unforgivable in a world where one of the principles we usually abide by is evidence of local policy and evaluation of impact.

So I’d say to you that, if you get hit with a long-term austerity programme, right at the outset some money should be spent on tracking its impact, particularly on the most vulnerable members of your community.  That way you will better understand where to target subsequent cuts in services.

Finally, we spent a long time having the wrong narrative. Bleating on about lower funding is absolutely pointless and it doesn’t have much impact on national government either.

It’s much better to tell the story about what you’re still trying to achieve. What is your organisation for? What are the priorities you’re working to? What are the outcomes you’re trying to change?

What’s going well in your country and what still needs improvement?

Local government has been amazingly resilient, has adapted and become more creative. I don’t think you need austerity to drive creativity. But the truth of the matter is that it has. We now need to work out how to sustain that increased creativity once this phase is over.

We now have a whole bunch of councils thinking really imaginatively about what they want to do on a third to a half of the amount of money they had previously. That’s a real tribute to local government and something to be celebrated.

Local government’s role in economic development is also going really well. The global financial crisis set the UK back a long way. Local government has played a fantastic hand in helping economic development flourish during a really difficult period of reduction of public finances. And whilst we’re still struggling post-Brexit with whether or not we will go back into technical recession, there’s a real success story about investment in infrastructure.

Devolution is also seeing a commitment by national government to empower local government a bit more so we can be financially self-sufficient and much more self-determining.

The big national challenge in the UK is housing. Ever since the ’50s we should have been building 250,000 houses every year. We’ve been building less than 120,000 most years. So there’s a huge housing shortage across the UK. But it’s also an opportunity for local government to get back into housing building again. My council, slightly uncharacteristically at the moment, has built a whole lot of social housing – both housing for rent and housing to buy.

The second challenge – and therefore opportunity – is community engagement. We’ve got a whole bunch of councillors whose job isn’t to run a council – whose job is to represent the communities that elected them. So they need to represent, empower and enable those communities in a way that is as independently-minded as can be.

Austerity has helped with that as well because it’s made people realise that not everything is going to get paid for by council and maybe some things never should be.

The final challenge or opportunity is the potential of digital. Local government has cracked the importance of the customer and things like channel shift but it hasn’t tapped into the significance of digital and how it can dramatically reduce costs in local services. Digital is not the panacea but local government hasn’t gone far enough with it.

We haven’t used digital to revolutionise the way we operate or how we organise ourselves.

For more on local government reforms in the UK see: ‘Growing pains‘.

This article was first published in the November 2016 issue of NZ Local Government Magazine.

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