The local government funding model is no longer fit for purpose. CIPFA and the LGA’s Independent Commission on Local Government Finance makes a compelling case for change.
There are only a few months to go until the general election and the memory of the Scottish vote still fresh in people’s minds. Subsequent proposals for further devolution are even fresher and so the recommendations of the Independent Commission on Local Government Finance are perfectly timed. Politicians should be reminded of the need to reform council funding too.
The word ‘remind’ is important. The local government funding system in England is by far the most centralised in the world and there have been increasing calls for its reform over the last 20 years. In a sustained period of austerity, the current model is quite clearly no longer fit for purpose.
The commission is not an isolated voice, but one that builds on the momentum from previous commissions including the one led by Sir Michael Lyons, which identified many of the fundamental problems with the current finance system. Compelling evidence has been presented to the commission, not just from a UK perspective, but drawing on examples of local government funding from around the world.
Dame Kate Barker’s recent report on health and social care made a well-observed point when it said that giving people choice does not solve the problem: they need to be able to choose from the right selection of options. Making the right choices is not always easy and not always instantaneous. For this reason, the requirement to provide a funding system with longer-term budget settlements is without question a key part of the way forward. Local government may make better and different choices if it had a longer-term perspective, even if the quantum of funding remains the same.
Local government must be prepared to help shape the solution by maximising the use of the current powers it holds, ensuring it is accountable to the electorate it serves, innovating where new opportunities present themselves and working with partners to deliver the best possible services within the funds available. The recent moves to create combined authorities in Manchester and elsewhere have created a radical and newly energised sense of purpose. They have also heralded positive moves towards greater devolution in England, and we hope that reform to the funding system is recognised as being equally crucial.
This leads onto accountability. The strength of local government is that it is positioned to know and respond to the needs of the electorate. However, it must be accountable to the public it services, which requires a strong governance framework and transparent accounting. Concerns are sometimes voiced about the way local government uses its powers to raise taxes and charge for services, but the answer lies in being an elected body directly accountable to those that vote. Local communities understand the need to raise income and the need to support the vulnerable. Perhaps the reform of the funding system is not only about trusting local government, but about trusting the people it serves.
Ian Carruthers is executive director of policy and technical at CIPFA
