A country that lives within its means: home economics for local authorities (1)

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A country that lives within its means: Spending Review 2015 presents some hints as to what the government is expecting its departments, and others in the wider public sector working under those departments, to do to implement the prescribed cuts.

Much of the report is spent telling us what government has done already, but there are some hints given about what is expected for the future. Government proposes a “strategic approach to spending”, prioritising specified core outcomes:

• promoting innovation and greater collaboration in public services;
• promoting growth and productivity, including through radical devolution of powers to local areas in England;
• delivering high-quality public services (including the NHS);
• promoting choice and competition;
• driving efficiency and value for money across the public sector.

For local government this creates the skeleton of what we can expect come November: a focus on devolution to city regions willing to agree to an elected mayor, and a drive towards initiatives that develop, grow and improve local economies. Aligned with this is the drive to a more integrated public service, especially in the areas of health and adult social care.

The Report declares that “The UK needs to make significant improvements to productivity across the regions, and the government is committed to further radical devolution of power within England”.  A large part of this is expected to come through the creation of a “Northern Powerhouse”.

Proposals from those contemplating a city region and elected mayor are expected to be “fiscally neutral” – and are requested by September, after which time DCLG and HM Treasury will “work with city regions to help develop their proposals”.

It was revealed in the 2013 Autumn Statement that “at least” £12bn would be devolved from central government departments between 2015/16 and 2020/21 to the Local Growth Fund. Through this Spending Review Government also aims to identify which budgets will be devolved to meet this objective. LEPs can, therefore, expect a little more certainty over the next five years.

Government is proposing to transform the approach to local government financing as well as decentralising power. While there are no specifics about how local government financing will be transferred, it seems likely from the tone of the Report that greater funding will be accessible to those local authorities that engage themselves in a city region, and/or to those that can demonstrate they are working towards growth in the local economy. Councils perhaps now need to be focussing on what their strategy is for growing their local economy and the potential revenue production from that growth, both for the local authority (through an increase in business rates revenue) and for the area.

Many councils are contemplating the commercialisation of their services as the way to develop resources to meet their statutory responsibilities. But this is a finite market. It is the way in which councils facilitate economic stimulus in their areas that holds the key to developing more resources, but to achieve this requires a clear plan for attracting investment and market activity. Every council has to ask itself: what is the plan it is working to achieve? If there isn’t one, then, “Houston, we have a problem”.

Contact Gayle Monk.

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