Local government finance reform ‘unavoidable’, Whiteman tells MPs

25 Mar 14
The funding system for local government could cease to work effectively within a decade due to constraints placed on councils, the chief executive of CIPFA has told MPs

By Richard Johnstone | 25 March 2014

The funding system for local government could cease to work effectively within a decade due to constraints placed on councils, the chief executive of CIPFA has told MPs.

Rob Whiteman

Giving evidence to the communities and local government select committee inquiry into fiscal devolution to cities and city regions yesterday, Rob Whiteman said the current local government finance system would need to be reformed.

‘My own view is that sooner or later this issue will have to be addressed.

‘I think we’ve seen over the decades the amount of latitude that local authorities have being constrained, and I actually think it’s now to a point where, within a decade, the system just might not work any more because councils are just so straitjacketed in what they can and cannot do. 

‘I personally think the opportunity to look at the role of local government – how does that relate to other areas of public spending, how best that should be financed and how best it can be held to account for its financial decisions ¬– is the shape of the future.’ 

Whiteman said the local government finance commission being set up by CIPFA and the Local Government Association would begin its work by looking at international examples of how public money can be pooled and aggregated in local areas.

He highlighted that councils have successfully pushed for greater control over some resources and services, such as through the Community Budgets initiative.

However, he added that the current system of Whitehall spending limits for individual departments, which, while ensuring cost control, does not create a system that supports spending on prevention or early intervention.

‘I think local government has quite successfully raised an argument that this needs looking at on the whole.

‘So the broader point is: is there a role for councils to ensure that public money being spent locally can be spent in the most efficient way?’

A key test of any reforms to localise more spending power to cities and regions would therefore be whether it led to an increase in preventative spending and early intervention funding over the long term.

‘I think it’s quite easy to think, “what if after a few years there were differences, how will that be equalised”, and I can understand the argument for resetting [within a more localised system],’ Whiteman said. 

‘But the test for the system is over a 30, 40, 50 year period – would we see investment in preventative services, would we see a system-wide understanding of spending, would we see much better join up between different services.’

Also speaking to the MPs was LGA chair Sir Merrick Cockell. He called on the government to stop piloting whole place Community Budgets and give the powers to all local authorities.

The schemes represent good value, he said, with an analysis by Ernst & Young concluding that between £4.2bn and £7.9bn a year could be saved through more pooled spending.

‘That’s what the evidence tells us,’ Cockell said. ‘The message is break down those barriers, pool budgets and share staff. We would say stop piloting and accept that this is the way forward.

‘Government should let that happen. Local authorities shouldn’t need to have to go continually to government for these changes, they should be available for local areas to come together and put their case.’


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