Local Government Studies – virtual special issue on budgeting

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Alison Gardner & Vivien Lowndes

Anyone following the news over the last nine months might be forgiven for thinking that the UK’s relationship with austerity had taken a rollercoaster ride.  In June 2015, George Osborne told central government departments to plan for 25-40% spending cuts, citing his aim for the UK to become ‘a country that lives within its means’.  His ‘fiscal charter’ signalled a departure from a historic reliance on government borrowing financed through economic growth, towards an aspiration to consistently deliver a budget surplus from 2019-20 onwards.  Then in the 2015 autumn statement and Comprehensive Spending Review, forecast cuts to many departments were mitigated, prompting parts of the press to herald an ‘end to austerity’.  Nonetheless Osborne has since been keen to emphasise ongoing threats within the global economy, arguing that austerity remains a necessity.

From the point of view of English local authorities, continuing austerity – including a reduction in central grant funding of 60% – has been balanced against a ‘devolution revolution’: a promise of increased powers and fiscal autonomy for councils that are prepared to join together to create ‘combined authorities’ reflecting  ‘functional economic geography’.   For some local government advocates, devolution represents a long-sought opportunity for the sector to break free from Whitehall’s straightjacket of fiscal control.  However, from a critical perspective, devolution may also represent a diversion:  a convenient sleight of hand that allows the government to disavow responsibility for underfunded local services, whilst breaking Labour’s urban power base in the cities, and increasing central leverage over core areas of policy.

Our new article ‘Local Governance under the Conservatives: Super Austerity, Devolution and the Smarter State’ argues that – despite reports of a ‘flat’ comprehensive spending review funding settlement –  local government is in fact entering a period of super-austerity, underpinned by a consistent trajectory towards reducing the size of the local state.  Cuts, such as the recently announced 6.7% real terms reduction in spending power, are downplayed or obfuscated, while assumptions of growth in local sources of income will be realised unequally.  Under the Coalition government , spending cuts impacted most severely upon the poorest localities, and (despite recent changes to the DCLG grant funding formula)  future funding reductions – as well as unequal opportunities to raise income – threaten  to reinforce a distinctive geography of austerity with deepening  spatial inequalities.

Optimists point to the opportunities of devolution, reform and efficiency.  Devolution has gathered cross-party parliamentary support, and large cities such as Manchester have been keen to be at the forefront of governance innovations such as combined authorities, and devolved health spending.  Proposals to localise business rates, and allow (limited) flexibility to elected mayors in increasing council tax have also been welcomed.  However, the economic benefits arising from devolution are uncertain and disputed, playing out unevenly and over the longer term, whilst spending cuts are front-loaded.   ‘Devolution’ also effectively provides for some key functions – such as economic development – to be centralised from local government to a new sub-regional level.

In addition, rather than emerging organically as a symbol of local confidence, devolution has in recent months been focussed on strategies to mitigate local deficits, driven forward under conditions of compromise and constraint.  Progress on creating combined authorities, initiated cautiously under the 2010-2015 Coalition, was rapidly accelerated by a Treasury invitation for all local authorities to submit ‘fiscally neutral’ devolution proposals in advance of the comprehensive spending review.  The summer of 2015 saw an unseemly scramble to submit hastily negotiated proposals, with some awkward alliances constructed under the threat of further spending cuts.  The Government has also insisted on directly elected mayors as a cornerstone to devolution deals, despite a rejection of the principle across many English cities in 2012, in a move that could potentially short-circuit existing local political structures, and diminish local democratic representation.

In relation to the wider public sector, David Cameron has outlined a vision for a “smarter state”, but proposals appear to rehash new public management principles, with relatively little focus on local government.    Most local authorities are already well advanced in implementing the reforms which the government describes, and multiple studies suggest that local authorities are reaching the limits of ‘efficiencies’.   Increasingly local communities are being called upon to construct their own safety nets.

In effect, the direction of local governance under the Conservatives appears to point towards a form of ‘roll-out’ neo-liberalism, signalling an active construction of an alternative and right wing model of the local state, in contrast to the deconstructive ‘roll back’ neoliberalism practiced by the Coalition.  Whilst this brave new world will create opportunities – especially for areas that are already prospering – prospects are less certain for areas without strong local economies.  This radical transformation also implies a technocratic transfer of power, taking place with minimal public engagement.

Dr Alison Gardner and Professor Vivien Lowndes have just published Local governance under the Conservatives: super-austerity, devolution and the ‘smarter state’ in Local Government Studies. You can get free access to the paper through the virtual special issue on local authority budgeting. 

 

Alison Gardner

Alison Gardner has recently completed a PhD at the University of Nottingham.  Her research interests include local responses to austerity, and the changing relationship between civil society and the local state.  She previously worked in policy roles with local authorities, the IDeA, Local Government Association and the civil service.

Vivien Lowndes photo

Vivien Lowndes is Professor of Public Policy at the Institute of Local Government Studies, University of Birmingham UK.  She has been researching institutional change in local governance for 25 years, including recently Why Institutions Matter (Palgrave 2013).  Current work looks at gender and institutional change and the impacts of migration.

Combined Authorities and Del Boy Devolution

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Chris Game

It was quicker than a full-term pregnancy. In late January, less than nine months after the General Election, the Cities and Local Government Devolution Act (CLGDA) received its Royal Proclamation – sorry, Assent. By which time eight bonny ‘devolution deals’ had already been hatched out into the local government world.

For the record and terminological clarity, these comprise the five established Combined Authorities (CAs) – Greater Manchester, Sheffield and Liverpool City Regions, West Yorkshire, and North East – the announced West Midlands and Tees Valley CAs, plus unitary Cornwall’s non-CA deal. All but West Yorkshire and Cornwall are elected mayor-based. An eighth proposed CA, North Midlands – Derbyshire and Nottinghamshire – could be said to be experiencing Labour pains, since one reported cause of its delayed confirmation was local Conservative MPs’ concern that the two Labour-inclined counties could elect the wrong kind of mayor.

Had these devo deals been babies, suspicious relatives might have been making legitimacy checks by counting the weeks. Here, though, the concern is less legitimacy than motive. Was all this haste confirmation of the Government’s, and particularly Chancellor George Osborne’s, genuine commitment to overthrowing “the old, broken model of trying to run everything in our country from the centre of London”? Or/and something else?

The Commons Communities & Local Government Committee, while welcoming the principle of the Government’s ‘bespoke’ approach to devolution, wasn’t convinced of either its commitment or capacity to deliver. It judged the policy so far to have been rushed, politically driven, and lacking in direction, rigour, assessable outcomes, and democratic or public engagement. The Institute for Government (p.9) was similarly critical: a compressed and “opaque proposal and negotiation process …”, comprising “unspoken expectations … [and] unwritten rules”.

Neither review, though, noted more than in passing the question that’s increasingly preoccupied the local government world for the past several not months, but years: is the real agenda behind much of this devolution stuff reorganisation or unitarisation by stealth? About doing covertly what Sir Eric Pickles denied himself overtly as Communities Secretary with his 2008 promise to shoot with his pearl-handled revolver the first civil servant proposing local government reorqanisation? It was there in the original Bill but largely overlooked, then boosted by one of several late Government amendments. Now, it seems, any erstwhile stealth has been supplanted by something resembling Del Boy Devolution.

Various INLOGOV colleagues have commented in these columns on aspects of the Government’s devolution policy virtually since the CLGDA’s conception (and that really is the last outing for this metaphor). It’s an appropriate moment, therefore, for an update, focusing particularly on some of those late and under-reported changes during the Bill’s parliamentary progress.

First, though, a bullet-point summary of what is an essentially enabling Act, whose main legislative function is to amend and extend the 2009 Local Democracy, Economic Development and Construction Act (LDEDCA) that introduced CAs. With little reference to the content to the ‘devolution deals’ that are its chief product, the CLGDA’s core provisions relating to CAs:

  • empower the Secretary of State (SoS) to create mayoral CAs with a directly elected  Mayor who will chair the CA and may, with the SoS’s approval, raise a precept on constituent authorities’ council tax bills;
  • extend CAs’ limited remit of economic development, regeneration and transport to include any local government function, including health service functions;
  • remove CAs’ boundary restrictions prohibiting non-contiguous or doughnut- shaped areas;
  • empower the SoS to require the mayor to exercise specified functions individually, including those of the Police and Crime Commissioner;
  • empower the SoS to transfer to mayoral CAs the functions of other public authorities in the CA’s area, including government departments, but not county or district councils; also to confer on a CA the general power of competence;
  • require CAs to appoint audit and overview and scrutiny committees.

It’s hard to believe that, without the apparently irresistible rhyme, even George Osborne would have dared label as a ‘Devolution Revolution’ a package involving minimal fiscal devolution, no subsidiarity presumption, and no formula for lastingly rebalancing the relationship between central and local government. Certainly, the recurring ‘empower the SoS’ mantra in the bullet-point summary makes it manifest who in the first instance is the chief enablee here. This is a top-down, Osborne-controlled, ministerially managed devolution – or ‘Treasury Power Grab’, as Jim McMahon, Oldham’s new MP, former council leader and Northern Powerhouse architect, described it in his recent maiden speech (Jan 19, Col. 1369).

But that’s not the main point in this particular blog, which is more about the legislation’s footnotes. As summarised above, the Act’s key provisions read much as they did in the original Bill – though not necessarily the same as in interim versions. The required elected mayor was critics’ main target throughout, and, perhaps distractingly for those rushing to prepare devolution bids, from July onwards (within days of Cornwall’s non-mayoral deal being announced) the Bill contained a Lords amendment overruling the requirement that an elected mayor be a precondition for the transfer of functions to a CA.

In December, predictably enough, the requirement was restored by the Commons, and indeed strengthened. Notwithstanding the arguments of the LGA (p.17) and others that an elected mayor is not the only, or invariably the most effective, accountability model available, the amendment would, claimed ministers, risk jeopardising the Greater Manchester and Sheffield deals already negotiated. Besides which, it was in the Conservative manifesto, and thus merited strengthening. The SoS’s power to require an existing CA to adopt an elected mayor and remove a dissenting council now allows such an order to be made when more than just one council dissents, provided two constituent councils plus the CA do consent. As we’ll see again shortly, consent is not a big thing with this Government.

There’s a rambly bit in St Matthew’s gospel that struck me as relevant here. After warning about false prophets and wolves in sheep’s clothing, it switches to bad trees not bearing good fruit – and therefore “by their fruits ye shall know them”. Here, I’d suggest that “by their late amendments ye shall know them”.

There was an exceptional number – 87 Government amendments alone considered by the Lords on Jan 12 (Col. 139) – partly due presumably to the speed of the Bill’s drafting and partly to its being sent to the Lords first. Many were uncontentious drafting changes – but most of the substantive ones, like elected mayors, took the form of restoring the status quo ante, the Government’s Commons majority having now rejected an earlier Lords amendment.

There was the odd conciliatory concession, like agreeing to the SoS providing annual reports to Parliament detailing devolution progress in all areas of England – harmless enough, with the information presumably already in the public domain. But anything conceivably problematic – requiring all Government Bills to include a ‘devolution statement’ that they are consistent with the principle of devolving power to the most appropriate level, or removing the SoS’s discretion in assigning CAs the general power of competence, or reducing the voting age for local government elections from 18 to 16 – forget it.

Which brings us to reorganisation. There were two relevant clauses in the original Bill, neither initially attracting great attention. One streamlined the procedure for creating a CA or amending the structure of an existing one by empowering the SoS (once again) to make an order, rather than wait for the relevant authorities to produce a ‘scheme’.

A late Government amendment took this streamlining further – or, as ministers prefer, increased local flexibility – by removing councils’ vetoes over CA boundaries. A district council can now join a CA without requiring its county council’s consent; likewise, even collectively, districts can no longer veto their county council joining a CA. Late it may have been, but it has potentially big implications – for Nottinghamshire and Derbyshire, for example, both of whose northern districts would now be able to join Sheffield City Region without their county councils’ consent.

The other clause, in a different section altogether from CAs in the original Bill, was also directed at two-tier areas. Acknowledging some such areas’ dearth of enthusiasm for particularly mayoral CAs, it provided for the devolution of functions and powers to single local authorities acting alone. Orders could be made (by the SoS, of course) to introduce fast-track changes in respect of boundary reviews (as in Cornwall’s deal) and governance arrangements, which, it was explained, “may involve mergers of councils, moves to unitary structures, or changing the democratic representation of the area with different electoral cycles and fewer councillors”.

It seems a kind of Del Boy approach to devolution that presumably comes naturally to a business-driven government. The rack rate for devolved powers is an elected mayor, but get together with your mates or offer us up a few councillors and we should be able to do you a deal. Indeed, possibly a streamlined deal, as another late Government amendment enables the SoS to make changes in council boundaries with the consent, if necessary, of just one authority in the relevant area.

This is the reorganisation or unitarisation by stealth that exercises councillors and MPs alike, and it produced some of the most agitated contributions to the Bill’s Commons Report Stage – the only thing being, as the Minister pointed out, that it’s hardly by stealth, since the Government has had the power to impose structural change without the consent of local councils since the 2007 Local Government and Public Involvement in Health Act.

Chris Game - pic

Chris Game is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.

Local Government Studies – virtual special issue on budgeting

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Peter Matthews

This February to April local councils across the UK will be setting their budgets for 2016/17 in unprecedented times. The Comprehensive Spending Review has set local government in England on a new course where it will be expected to raise far more of its own income through Council Tax and Non-Domestic Rates. Revenue Support Grant, which transfers money between local authorities, is essentially being abolished by 2020 – to be discussed in greater length in a paper to be published in Local Government Studies soon.

Local government in the UK has to continue providing a range of statutory services. The budgetary pressures upon them are leading to strategic choices to remodel services through outsourcing and co-producing services with local communities. The editorial team of Local Government Studies has put together a virtual special issue gathering together recent publications to inform this debate. The papers present academic research and commentary on the situation UK local government finds itself in now: with review articles by Peter John, Vivien Lowndes and Laurence Pratchett, and John Stewart, along with a review of the extent of the cuts and how local councils are coping from Bailey et al.

We then turn to specific contributions as to how local government is responding, or might respond, to the austerity it faces: through case studies of the devolution of risk to local communities and individuals in Bristol and Liverpool; a discussion of resilience; place-based leadership and innovation and finally strategic commissioning of outcome-focused services. We close the special issue by drawing on international evidence to ask how we might understand the financial risks local authorities face, but also the difficult link between public attitudes and fiscal challenges and choices.

The following articles are free to read through this link only until 31 December 2016.

 

Peter matthews small

Peter Matthews is a Lecturer in Social Policy at the University of Stirling. He is a member of the editorial team of Local Government Studies published in association with INLOGOV.

Designing in Collaboration: Challenges for the new Combined Authorities

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Max Lempriere and Vivien Lowndes

At a workshop hosted in December 2015 by City-REDI, INLOGOV, The Public Services Academy at the University of Birmingham practitioners and academics from the world of local government came together to share experiences on the current Combined Authorities and city-region devolution agenda. In the fifth of a series of posts Max Lempriere and Vivien Lowndes reflect on the day’s major talking points.

The raison d’être of Combined Authorities is to foster collaboration amongst neighbouring local authorities in a time of limited resources, fiscal restraint and ‘wicked issues’. The goal is to stimulate economic growth through better integrating transport, business support and skills development at the sub-regional level.  Alongside the growth agenda, combined authorities are considering their potential role in public service transformation, especially in relation to health and social care.  Combined authorities are also an opportunity to express local identities and challenge London-centric policymaking through, for example, the development of the Northern Powerhouse or Midlands Engine.

By pooling resources, local authorities can avoid duplication and, share staff, expertise and ideas – and risks. This kind of ‘public-public’ partnership can lay the groundwork for the Combined Authority, but collaboration needs to goes far wider to include a range of organisations from the public, private and civil society sectors.  Indeed, the three Local Enterprise Partnerships in the West Midlands will be full members of the new combined authority.  So it isn’t just the case that constituent local authorities need to collaborate. Indeed, the more diverse the range of organisations involved, the greater the potential in terms of gaining insight.   And engaging with civil society groups holds the promise not just of leveraging expertise and capacity, but also of enhancing citizen involvement in local decision making.  Since the Greater Manchester Combined Authority was given budgetary control over local NHS spending (February 2015), this has necessitated collaboration between local council leaders, health and social care providers, clinical commissioning groups, and a range of patient and community bodies.

There is considerable scope for local Universities to play an important collaborative role in the devolution agenda.  Supporting the new combined authorities will require bringing together those who create and apply knowledge within different sectors.  Universities can make available an evidence base to support economic development activities, but also to inform new collaborative governance arrangements themselves.  Universities themselves have a strong incentive to engage proactively in knowledge transfer, given the Treasury’s insistence that research must be able to show demonstrable ‘impact’.  Universities can also play an ‘honest broker’ role in convening opportunities among relevant parties, as is happening in the current move to establish a Midlands Engine to rival (or complement) the Northern Powerhouse.

Despite these opportunities, collaboration is deeply challenging. It requires the fostering of an environment in which the needs of the Combined Authority as a whole are put before those of individual local authorities. This is a difficult task, especially when organisations have been used to having executive sway over their own actions.   Rather than seeking ‘competitive advantage’, organisations need to focus on the potential gains from ‘collaborative advantage’.  In a nutshell, this offers individual organisations the chance to achieve outcomes that they wouldn’t have been able to accomplish on their own.  In fact, they may not even have thought of them!  The aim is not just to improve the delivery of existing services, but to re-imagine what local government might offer a locality through collaborative working.  Entirely new visions, and ways of working, could arise out of the process of collaboration.

New forms of leadership are important in fostering collaboration. Different skills and personal qualities are required, in comparison with leading a single organization.  Research shows that, whatever structures and procedures are put in place, it is often ‘special people’ who make the difference.  Such individuals may not be in the most senior positions, but they demonstrate the ability to bring different groups together, build trust and foster creativity, identify and harness the added value from collaboration, and maximize learning.  Typical personal skills are sociability, pragmatism, personal resilience and a sense of humour!  Collaboration is more than a list of email addresses or skype contacts.  Face-to-face contact and practical step-by-step objectives are crucial.  We all know these sorts of natural collaborators when we meet them.  Talent-spotting for these skills is an urgent task for councils considering secondments to the new combined authorities, or new collaborative roles at council level.  Nurturing new collaborative champions is a responsibility for all partners, as is ensuring that we all learn from those to whom collaboration comes more naturally.   We can’t create these ‘special people’, but we can foster environments in which they flourish – and are rewarded.  How many performance management agreements, or appraisal systems, take account of collaborative as well as organizational achievements?

While new directly elected mayors will head up the major combined authorities, and act as important points of accountability, they won’t provide a substitute for a network of committed ‘boundary spanners’ on the ground.  What they can do is provide the overall vision for their locality, providing a clear answer to the question: What is devolution for?  Mayors can also champion particular forms of collaborative behaviour that put the interests of the locality before that of any individual organization, and also prioritises engagement with residents, communities and local businesses.

Collaboration needs to be the DNA of the new combined authorities.  A commitment to collaboration needs to inform the design of all the new roles, structures and processes.   Collaboration needs to be designed-in from the start.  The goal should be the integration rather than the simple aggregation, of governance capacities within the locality.

This series of workshops is being supported by the Economic and Social Research Council, Local Government Association and the Society of Local Authority Chief Executives (SOLACE) and is led by Catherine Staite, Director of INLOGOV and SOLACE’s Research Facilitator for Local Government.

 

 lempriere

Max Lempriere is a final year PhD researcher at the Institute for Local Government Studies at the University of Birmingham. His research interests include institutional design, local government policy making, devolution, urban planning and sustainable development.

Vivien Lowndes photo

Professor Vivien Lowndes is involved in research, teaching and knowledge transfer on local governance and public services. She is particular interested in partnerships, citizen participation, and gender issues. Currently Vivien is working on the development of Combined Authorities in the context of devolution, local government responses to austerity, Police and Crime Commissioners’ gender policies, and the use of evidence in migration policy. With colleagues at INLOGOV, she is also engaged in comparative research analysing innovative governance institutions in the UK and Brazil.

INLOGOV-facilitated Hull Commission receives media, business and community endorsement for its final report

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Daniel Goodwin, Senior Associate Fellow

The Hull Commission’s final report was published on 13th January 2016 and was widely reported in regional media. The independent Commission, which was facilitated by INLOGOV, said that a fresh joint approach to economic development and local government organisation is needed in Hull and the East Riding. It found that Hull and the East Riding are interconnected and should seek a fresh way forward together and that the two areas often pull in different directions when they should be managed as one system. A new outward looking approach is needed if the area as a whole is to make the most of the opportunities available from devolution and the Northern Powerhouse.

The Commission was asked to review the effects of the existing boundary on the city and sub-region. The existing boundary has the effect of making Hull look like a small city of 256,000, with up to 240,000 people and 2,700 businesses left out of the picture. Given the real size of its travel to work area and economy ‘Greater Hull’ should be considered as being a city of around 500,000. The boundary significantly skews not only statistics and the way the area is perceived but works against the ability of the city and sub-region to function effectively as a single economic unit.

One possible way forward would be to move the boundary further into the East Riding. However, the Commission took the view that this would be highly unpopular, could well make the remainder of the East Riding unviable and, in any case, is probably impossible under current Boundary Commission rules.

The Commission therefore concluded that the only logical solution to the boundary issue would be to merge the two local authorities. This would make it far easier to join up economic development and infrastructure strategies and develop more effective arrangements for health and social care commissioning. Furthermore, complete removal of the boundary would achieve a political balance and overcome some of the reasons behind public opposition to redrawing it. The Commission also noted the political realities that make this logical solution a probable non-starter in the immediate future, and the need to take account of the rapidly developing Government agenda on devolution and the Northern Powerhouse.

The Commission was required to consider ways in which local government in Hull and the East Riding might better meet the goals of being effective, efficient and accountable. The devolution agenda has moved very swiftly, yet Hull and the East Riding are still not part of devolved arrangements such as those in Greater Manchester and the Sheffield City Region, pooling expertise on growth and infrastructure, with greater powers to make positive change happen. The Commission considered that this must be urgently addressed.

Furthermore, with the Northern Powerhouse and Enterprise Zone developments in mind, the Commission believes that there is a powerful case for a Combined Authority based on the Humber, providing focus for the development of the economy, distribution networks, infrastructure and environmental matters centred on it. It found that political animosities have stood in the way of progress on this option in the recent past. If at all possible they should be addressed and the possibility of a Humber Combined Authority brought back onto the table. The Commission considered that that appropriate consultation with business and a full public debate would make it possible and reflected this in its recommendations.

The Commission heard that there is a possibility that Hull will become a partner, without the East Riding, in the West Yorkshire Combined Authority. It considered this to be a poor outcome because it neglects the economic significance of the Humber, leaves Hull as a small, junior partner and cements the boundary problem further. It also heard that the East Riding is in active discussions with North Yorkshire and York about a North Yorkshire Combined Authority. This would present a similarly poor outcome because it would take the “Greater Hull” business rates with it into a different pool, splitting the economic development and infrastructure planning further away from Hull. Given all the above, the Commission concluded that Hull and the East Riding must be managed as one system, not two. This would provide the area with a much more powerful voice in any Combined Authority arrangements. This view was endorsed by 30 leaders from business, public and community sectors who met to discuss the report. The group was very supportive of the Commission’s concern to support the economic opportunities of the Humber and to ensure that Hull and the East Riding stay together in any future devolved arrangements.

There was also concern not only that the area should in future look outward to the national and international stage but also that local community identity should be respected, whilst ensuring that the Humber develops positively for all who live work and study here.

There was real concern that Yorkshire as a whole is missing out by not coming to an agreement with government about future devolution arrangements. The group wanted local politicians to exhibit a greater sense of urgency and to work together to resolve a positive way forward.

Further information and links to sources may be found through the Commission’s pages on INLOGOV’s website at: http://www.birmingham.ac.uk/schools/government-society/departments/local-government-studies/research/hull-commission.aspx

 

Know your local Councillor Photographs - St Albans - May 2008

Daniel has worked in local government for over 30 years in a range of councils and was previously Executive Director of Finance and Policy at the Local Government Association and Chief Executive of St Albans City & District Council. He is an INLOGOV Senior Associate Fellow, contributing to thinking, learning and action in local leadership and services, the wider public sector and beyond. Daniel has a Masters in Public Administration from Warwick Business School and is also a Fellow of the Royal Society of Arts.

You say ringfencing, I say earmarking: those billions of local authority ‘hoarded’ reserves

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Chris Game

A welcome feature of Communities and Local Government Secretary Greg Clark’s early months in office were his obvious efforts to be less interventionist and provocatively critical of local government than his predecessor, Eric Pickles. It’s not taken long, though, for it to become clear that he’s not that cuddly, and that the ghost of Pickles Past still haunts the DCLG’s Marsham Street corridors.

In early October (though largely ignored until recently by the UK media), in a party conference-pandering move straight from the Pickles playbook, Clark enthusiastically endorsed the Government’s plan to amend pensions regulations and procurement guidelines – the aim being to ban councils declining on ethical grounds to invest in or trade with companies involved, for instance, in the arms trade, fossil fuels, tobacco products, and Israeli settlements in the occupied West Bank.

So, come November’s Spending Review, it was more disappointing than surprising to hear the Communities Secretary not so much echo as anticipate George Osborne’s injunctions to local authorities to make good their grant losses by drawing on the billions of revenue reserves they’d built up – precisely as Eric Pickles was wont to do each budget-making season.

Indeed, the DCLG furnished the Chancellor – and, of course, the media – with what he deemed the convincing evidence of councils’ ability to do so, in the form of updated revenue expenditure and financing statistics (pp. 12-13, Table 6).  “Today’s figures show how they are well placed to … play their part in dealing with the deficit …, with local authorities holding £22.5 billion in non-ringfenced reserves – up 170% in real terms over the last 15 years. Now is the time to make efficient use of their assets and resources to provide the services local people want to see.” (my emphasis).

It was noticeable that Clark used neither of the inflammatory H-words – in contrast to Pickles, who in such situations was unable to stop himself sneering at the ‘hypocrisy’ of councils pleading poverty as they annually ‘hoarded’ their billions of cash reserves. But then he didn’t need to; Pickles’ media-training is by now well embedded, certainly in the tabloids.

Council reserves 1

The BBC was a touch more restrained, but statistically, at least in the East of England, about as useful as a punctured condom. “Councils across the East of England are sitting on reserves of £470m, a BBC East investigation has found”. Which might have been fleetingly interesting, had the ‘councils’ not comprised an apparently arbitrary selection of “all unitary, county and district authorities” from the East of England region and beyond, and had the figures borne any close correspondence to those just released by the DCLG, on which the ‘investigation’ claimed to be based.

Normally, none of this slapdashery would matter much, apart from irritating any viewers who resent being manipulated into being outraged at some scary big numbers and alleged mismanagement that they have no means of judging for themselves. In this case, though, it came to the attention of Councillor David Finch, Conservative Leader of Essex County Council, who understandably took the whole thing quite personally and proceeded ‘do a Hudspeth’.

INLOGOV blog readers may recall my recent account of the revealing correspondence between David Cameron and Ian Hudspeth, Conservative Leader of the PM’s own Oxfordshire County Council, in which the latter patiently and at length put the PM right on a number of misunderstandings he’d revealed about the county’s financial management and indeed about the impact of his own government’s policies. I sub-titled the exchange ‘the gift that keeps on giving’ and, although this wasn’t the form I anticipated a further instalment taking, it certainly fits the bill.

C’llr Finch had been one of numerous council leaders, in addition to the Local Government Association (LGA) itself, who protested back in November that:

“Whitehall should not be dictating how we should be managing our finances and reserves. Holding reserves is simply prudent and effective financial management and is done to ensure that in the event of an emergency or a major incident we can react without impacting other services.”

Politically if not personally, the Essex leader must have had a trying Christmas, not least through local MPs and their constituents having gained the impression that swilling around County Hall was not floodwater, as elsewhere in the country, but oodles of revenue reserves. He therefore wrote Cameron a three-page letter – described on his blog as ‘polite’ and by others as ‘hard-hitting’ and ‘scathing’ – setting out for the PM a few home truths. There were details of the council’s past savings, future enforced cuts, and ongoing budget pressures, but you sensed that, even more than these specifics, what really irked C’llr Finch was the flak he’d had to take about the council’s alleged reserves:

“I continue to be alarmed at central government misunderstanding, or even ignorance, about council reserves. Essex MPs have been told by the DCLG that the council is sitting on £300million of unringfenced reserves. We actually only have about £60million. The reality is we have just 23 days of available funding in our general reserve.” (my emphasis)

Like Hudspeth in Oxfordshire, the Essex leader is concerned more broadly about what he terms the “giant disconnect emerging between central government and local government” concerning local financial management (my emphasis). But the reserves issue has specific figures attached – a £240 million gap is a big misunderstanding by any standards – which means that the Essex section of the relevant DCLG table enables us to work out what’s probably been going on.

Council reserves 2

It would seem that the DCLG failed properly to explain, or the MPs failed to grasp, that, near-synonymous though the terms ‘ringfenced’ and ‘earmarked’ may be in any everyday conversation in which they may happen to appear, in local finance lingo they are fundamentally different. The DCLG distinguishes between local authorities’ ringfenced reserves, allocated specifically to schools or public health (though not housing, which is completely separate), and non-ringfenced, which are the rest.

Large local authorities especially, however, earmark often a large proportion of their non-ringfenced (sometimes labelled ‘usable’) reserves for a range of different but particular purposes. Like any prudent budgeter, they set money aside for future spending, rather than having to find it all when it suddenly becomes due by the end of the month. Common earmarked reserves are for financing future capital investment and major repairs, for PFI (Private Finance Initiative) payments on long-term projects, to cover claims made under a council’s self-insurance arrangements, to enable future savings targets to be delivered, and, not least in recent years, to safeguard against future years’ grant funding reductions.

The non-earmarked remainder – under one-fifth in Essex CC’s case – goes into the council’s General Fund, or C’llr Finch’s ‘general reserve’, which will be used to balance the budget if it’s overspent at the end of the year, but, in the meantime and more topically, will be used to pay for sudden and large cost pressures – like damage caused by exceptionally severe weather conditions.

David Cameron, who either doesn’t understand or doesn’t care about these not terribly subtle ringfencing and earmarking distinctions, seems happy to fire off petulant and factually inaccurate letters to his County Council leader, and to have his MPs similarly badger their own councils.

Clark’s case, though, is different. He certainly does understand, not least because a CIPFA survey of local authority reserves only last summer spelt out the message in detailed clarity. The numerous “recent changes in local authority funding have significantly increased the level of risk being managed by local authorities” (p.2). The radical transformations in service provision on which ministers are so keen have major one-off costs, including redundancy costs, that have to be budgeted for (p.3). “Using reserves purely to support ongoing expenditure merely postpones the need for cuts and makes those cuts more difficult to deliver when needed …” (p.4).

Council reserves 3

Above all, there were the statistical findings of the CIPFA survey – that, almost precisely reflecting the situation in Essex, nearly four-fifths of councils’ reserves were not being either mindlessly or politically ‘hoarded’, but were already earmarked for specific, and often Government-created, purposes. To accuse ministers of ‘going native’ is almost a ‘Yes, Minister’ cliché and in Clark’s case probably unfair, but he certainly doesn’t seem as cuddly today as he did six months ago.

 

Chris Game - pic

Chris Game is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.