Memorandum to the Rt Hon George Osborne MP, Chancellor of the Exchequer
Subject: Autumn Statement and local government
Dear Chancellor
As you put the finishing touches to a vital Autumn Statement, you are understandably bound to be focused on international issues – the future of the Euro and the fragility of the global economy. You will also rightly be concerned with the UK economy, macro-economic and fiscal policy, and how to prevent a double-dip recession.
However, I very much hope that you will consider the contribution that local government can make to the country’s economic and social well-being, as well as its competitiveness. Local government’s annual expenditure of £180bn is not insignificant to the national economy and nor is the spending power of its 1.7 million employees.
I therefore urge you to address the following issues in your Statement tomorrow
• recognise the severe financial challenges that local government faces - and, of course, some easement on the reductions in grant would be welcome if you decide to revisit the Spending Review targets and timescales in response to revised economic forecasts
• provide additional resources (and borrowing credits) to local authorities to enable them to invest in infrastructure projects; encourage them to invest their pension funds in such schemes; and introduce new incentives to encourage public-private investment projects. Much of local government is asset rich and revenue poor. It needs to be both able and encouraged to adopt creative approaches to making the capital value of these assets work for the public good – for example, through asset rationalisation and investment of some of the receipts in local infrastructure development
• provide the means to enable local authorities - whether working with their public sector partners, the private, social enterprise or third sectors - to borrow finance through the markets and through social investment, to undertake preventative work that will lead not only to better outcomes for citizens and communities but also long term savings (drawing on the recommendations of the Allen Review and the experience of the 'Community Budget' pilots)
• introduce incentives to local authorities and the wider public sector to press ahead with the pooling of resources – people, property and finance – in line with 'Total Place' and 'whole area based community budgets', and to invest in voluntary and community sector capacity building
• encourage local authorities and others to commission and procure for public value - including local economic benefit, good employment conditions and sustainability, and where appropriate, allow them to use national procurement agreements to gain the benefit of scale in the market
• commit the government to no further de-regulation of employment conditions and entitlements when public services are contracted to the private and third sectors. This will offer employees some valuable protection and will, from your perspective, help secure some of the Open Public Services white paper objectives
• announce that the review of PFI will also address softer issues of governance, accountability, and public value as well as value for money, and the need for greater local flexibility and the development of local models to meet local circumstances
• introduce a more comprehensive review of local government finance which goes well beyond the limited consideration of the future of business rates - with the objective of securing long term local accountability, more locally-controlled revenues as a proportion of an authority’s total income, and some national redistribution of resources
• commit to a continuing funding for low council tax increases or freezes for this Parliament - or abandoning the current arrangement which runs the risk of resulting in large increases over the next few years as your subsidy is removed
• offer to work with local government and its public, third and private sector partners to drive localism and public service reform forward in a way that offers greater local choice and accountability, increased diversity, real opportunities for SMEs and genuine best value; and which is coherent across the public sector and Whitehall. The reality is that only the Treasury can drive such an approach across government – and, forgive my bluntness, you should do so with ruthless determination
• commit to work with the DWP, BIS and CLG and the local government community to restore clear and accountable roles for local government in local economic development and addressing worklessness; and enable local authorities to invest in and support the development of local SMEs and social enterprises
• as far as you are able given the economic and financial uncertainties, commit to offering local government some assurance that there will be no further cuts to the central government grant over the next three years and indicate that there will be some protection in future spending reviews given the disproportionate hit that it took in the 2010 review. This will provide some much-needed confidence and enable longer term planning
Finally, an immediate challenge is Wednesday’s public services pensions strike. Whilst there is wide and cross-party agreement that there need to be reforms to the public sector pension schemes, including the funded local government pension scheme, any reforms should be based on fairness and affordability for both the employer and the employee - and would be best secured through negotiated agreement.
Your Statement provides the opportunity for a critical intervention to commit the government to resolving the dispute through genuine negotiations and not the unilateral imposition of change.
You are a senior member of a government committed to localism and the role of local government. Through your Statement this coming week, through subsequent budgets and in so many other steers and gestures, you have the ability and opportunity to lead the localism charge by personal example - whilst at the same time securing your fiscal, financial and economic goals.
