A county council perspective for 2017

Cllr Philip Atkins, vice chairman of the County Councils Network (CCN) and leader of Staffordshire County Council, outlines hopes for the new year, including fairer funding for county authorities, the LGFS and social care

Politics in 2016 was turbulent to say the very least. The changes at the top within Westminster will undoubtedly continue to have an impact on local government, so the sector can look forward to another eventful twelve months.

Aside from Brexit, expect plenty of the local government narrative to be framed around the ongoing social care crisis, budgetary pressures on frontline services, children’s services, the devolution agenda, and the move to full business rate retention.

However, in all the debate over business rate retention, what may have slipped under the radar is the ever-pressing need for a more equitable funding system for local government. All of the big ticket services and policies outlined above will only be sustainable if fairer funding is placed at the heart of them, based on the real cost drivers for councils of delivering these services in their areas.

The current method of financing councils is based on a formula that is outdated, and does not relate to the demographic and demand-led needs of counties today. As a consequence, they have been historically underfunded compared to comparable upper-tier councils.

Disproportionate funding
Clearly, the sector has had to grapple (successfully) with an unprecedented efficiency drive, with a 40 per cent reduction in budgets between 2010 and 2015, but in England’s counties, these pressures are more pronounced due to this underfunding. Per head funding for counties is an average of £261, lower than any other comparable local authority type. This figure is less than half of what a taxpayer in inner London can expect; they receive an average of £553 per head for their services. This directly impacts on rural residents, who make up some 25 million of the country’s population, skewing council tax bills up and down England.

This disproportionate funding for inner London councils meant that 13 of them were in a position during 2016/17 to freeze or reduce their council tax bills; while virtually every county council had little option but to implement rises. Residents in Westminster paid £669 this financial year; while rural ratepayers were paying close to treble this amount in the likes of Dorset, Lancashire, and Nottinghamshire. Indeed, someone living in a multi-million pound mansion in Westminster pays £1,337.62 less council tax than a Band C home in the villages I represent around Uttoxeter.

Unfortunately, we are currently in a situation whereby rural residents are unfairly subsidising services enjoyed by residents in more affluent parts of the country. They are being penalised by geography. This is not as a result of financial mismanagement. County authorities have embraced austerity, delivering some of the biggest efficiency savings in the public sector, streamlining support costs and championing partnership working to make themselves more learn, freeing up resource to be spent on frontline services that matter to residents.

Counties spend less than two per cent of their budgets on support services, the lowest out of any other local authority type, while our authorities have reduced employee expenditure by 31 per cent over the last Parliament - again, more than any other local authority type.

The under-funding knock-on effect
Yet, going back to the frontline, the underfunding of CCN member councils also adds considerable pressure to the services we deliver to residents. Counties face some of the biggest demand led pressures on their budgets, due to their size and demographics. Children’s services is one of the biggest areas of expenditure, and referrals grew 11 per cent during last Parliament, which was against a national reduction. The most vivid impact is on adult social care. The care crisis needs no introduction, having been so heavily covered in the national media over the last few months.

However, it is more acute in rural areas, which are home to the largest and fastest-growing elderly population, which is forecast to rise by two per cent each year over the next five years. Indeed, demand for elderly care services grew 8.5 per cent during last Parliament. As coverage has shown, it is a pressure that has not abated heading into 2017.

Recent criticism levelled at local government over performance is based on overly-simplistic data that does not break down populations by per-head ratio. It is entirely plausible that the areas with the largest populations, not least the largest elderly concentration, would see higher numbers of delayed discharges from hospital. And the reality is complex further still: care markets, squeezed to the limit, are reducing, and therefore being able to provide care packages at short notice so patients can leave hospital is becoming increasingly difficult for both state and self-funders.

The short-term measures announced by the government last month will only have a nominal effect. Re-routing New Homes Bonus money is a welcome and logical step, considering the government is looking to incentivise housebuilding using other means, and the proposal acknowledges the immediacy of the social care crisis. But, considering some CCN member councils may not benefit at all from this, the Department for Communities and Local Government (DCLG) should consider targeted transitional measures for upper-tier councils facing a reduction in funding in order to safeguard frontline life-critical services.

Furthermore, frontloading the social care precept, while it will provide a short-term injection of cash, could leave some authorities worse off if they chose that option rather than a two per cent uplift over the next three years. Therefore, intelligent solutions, backed by genuinely new funding, are needed for a long-term solution to adult social care.

Last month, Communities Secretary Sajid Javid referenced the innovative work of Oxfordshire, which has driven down its delayed transfers of care through partnership working, clever methods, and targeting resource to where it is most needed, as well as Northumberland; which is well advanced in creating health and social care integration in its communities. This good practice is showcased in counties up and down the country; social care users in counties are most satisfied with the services they receive.

Health and social care integration
Health and social care integration is an ambition shared by local and central government, and true integration could help pave the way for sustainable local services and care markets, as well as reducing demand on the NHS locally.

Here, counties can play a major part in ensuring the integration agenda is a success. Their financial prudence, maximising efficiencies through transforming services, at a time when NHS budgets have been protected, should spread to the wider health service, while counties’ size, expertise, and ability to successfully work with partners, shows they should be trusted to lead this drive for more joined up health services.

But integration will only go some way to fixing social care – fairer funding is crucial to any solution for the sector. Around half of county authority budgets are currently spent on social care, illustrating the demand and pressures, yet county per head funding for elderly residents is the lowest of any other local authority type.

In essence, funding does not follow need nor demand on local services, and CCN has long called for this to be addressed. Last year, CCN played a pivotal role in securing the DCLG ‘fairer funding’ needs-based review, which will examine the current method of funding councils and could offer the opportunity to redress funding inequalities in the system.

Encouragingly, this review, announced last year, is still on the government’s agenda. Before the winter Parliamentary recess, Communities Secretary Sajid Javid said he will report back on the review’s progress this year.

In the coming months, CCN will be stepping up its efforts in advocating fairer funding for county authorities, and making the case for the acceleration of this review so member councils are well placed to deal with the extreme pressures they face now.

Looking ahead in local government
Speeding up this review is also crucial ahead of another major change on the horizon for local government: full business rate retention. As CCN’s research last year showed, designing a new system will be incredibly complex, and is fraught with risk that pockets of England will prosper, while others stagnate – failing to produce an economy that works for everyone.

Yet a fairer methodology of financing local councils is vitally important in designing a business rates system that will work, otherwise the current unfair nature of funding risks being embedded into a system, rendering it unsustainable after only a few years. Establishing a baseline of funding needed for an acceptable level of service delivery, and accounting for counties’ future and current pressures, will ensure the new system is fit for purpose, enabling local economies to flourish and grow.

Elsewhere, there will be plenty of other talking points in local government. For example, the two independent reports on structural reform that CCN commissioned generated plenty of debate late last year. Due to the severe financial pressures faced by counties, a number of councils across the country are looking at structural reform to protect and transform services and, due to the huge potential savings generated from the single county unitary model, enable them to address the significant financial funding pressures they face.

CCN released the reports as an evidence base for central and local government, and government ministers and the Secretary of State have acknowledged their value.

Overall, the evidence shows that maintaining county structures in any reform has a convincing financial, non-financial, and sustainability argument, especially when considering the need for further public service reform. However, each proposal has its own pros and cons; there is no one-size fits all model.

And the importance of counties, as England’s biggest and most historic local authorities, cannot be overstated for a government that has placed productivity at the heart of its economic policy. Counties are the biggest contributors to the national economy – generating 41 per cent of England’s GVA, and their potential must be tapped into.

However, fairer funding goes hand-in-hand with unlocking this potential; creating sustainable local services, putting in infrastructure to generate growth, and ensuring the transition to full business rate retention is a workable model are necessary for thriving local economies.

We look forward to working with government on the needs-based review this year.