Written evidence submitted by the Society of County Treasurers [SRF 035]

 

The Society of County Treasurers (SCT) is comprised of all Chief Financial Officers from the 25 shire counties in English local government. Following successive reorganisations of local government, the SCT also includes 14 shire unitary authorities that have similar interests in local government issues. Together, these 39 authorities represent 47% of the population of England and provide services across 87% of its land area.

 

The Society has always been keen to contribute to discussions on the funding for local government and is pleased to be able to submit this evidence. We do, however, hold reservations about what the inquiry hopes to achieve, or influence given the timing of the deadline for evidence – two days after the Treasury’s planned publication of the 2020 spending review. Nevertheless, please find attached our Society response – please also refer to any individual submissions from our members.

 

The SCT has responded to the Spending Review’s call for evidence as well as regular completion of the Ministry of Housing, Communities and Local Government’s DELTA returns to monitor the costs of the Covid-19 pandemic. Members have continued to work with our sister organisation – the County Councils Network (CCN) as well as the LGA and ALATS (Association of Local Authority Treasurers).

 

Summary

SCT members’ key message to the Treasury ahead of this year’s Spending Review was a call for an end to the current climate of extreme uncertainty. Local authorities find themselves planning in massively uncertain times, where even planning one year ahead has become almost impossible. Local authorities need to know the answers to some key questions: -

 

        Whether the costs of responding to the Covid-19 pandemic will be fully met

 

        Will ministers meet their promise to share the burden of council tax collection fund deficits

 

        Whether reserves will be depleted to dangerously low levels

 

        Whether the DfE has a credible plan for dealing with the high-needs deficits

 

        What will the future of Adult Social Care look like?

 

        How will council tax yields be impacted, given rising unemployment and increased demands on Council Tax support schemes?

 

        When will the desperately awaited Fair Funding Review be implemented?

 

        In the absence of a multi-year financial settlement for councils, how can effective planning be carried out?

 

Despite 10 years of austerity, chief financial officers in all tiers of local government have been at the forefront of the UK’s response to the pandemic. Local authorities have redeployed staff, supported local businesses and residents and the efforts of the care sector have contributed significantly in easing the pressure on the NHS. Local government’s response to the Coronavirus pandemic has been applauded by many with the World Health Organisation advocating locally led responses to the pandemic.

Government must use the Spending Review to address these many issues in order to allow councils to plan appropriately and support the Government’s aims of providing high quality public services and supporting the UK’s recovery. We accept that these are exceptional times but, after years at the forefront of austerity, local government is pivotal to the recovery and many councils, including our members, are close to emergency financial measures. It is imperative that this situation is avoided, and this can only be achieved by addressing the growing list of financial challenges as set out here and in the County Council Network’s (CCN) submission to the Spending Review.

 

In a recent CCN-led survey of its members just one in five councils was confident of being able to set a balanced budget in 2021-22 without dramatic reductions to frontline services. After years of austerity, there is limited scope to reduce non-care services such as libraries, bus routes, and school transport, meaning that the most severe reductions are likely to fall on social care, despite the pressures created by the pandemic. Without extra investment from Government, 56% of CCN members are planning to reduce access to care packages and/or introduce new charges for services. 42% said they would be implementing reductions to personal budgets and mental health services, leading to an inevitable shift of demand onto other services such as the NHS and Police.

 

A recent survey of SCT members indicated that despite ambitious savings plans there remains an estimated budget gap for 2021-22 of £470m – this figure is calculated after taking into account planned use of reserves, income from the Sales Fees and Charges Income Guarantee Scheme and savings targets. The primary cause of the gap is an increase in demand as a result of the pandemic – referrals to Children’s Social Services are already increasing as is demand for domiciliary care packages. Inflationary cost increases, which are often covered by increases in Council Tax Base are now more uncertain. Without additional funding, reducing services remains the only option. 

 

Delayed Fair Funding Review

One of this Government’s flagship policies has been to “level up” the country so that everyone can enjoy quality public services. SCT members are in firm agreement that this must be addressed in the 2020 CSR. Our members are working hard to support the recovery in their own areas and have long been calling for an end to inequitable levels of funding and services. We too want to see great quality public services providing excellent outcomes for the people that use them but are often frustrated by the parameters that constrain us. The Fair Funding Review must be implemented as soon as possible before “levelling up” becomes too difficult and before the work already completed becomes out of date. 

 

Uncertainty

As highlighted in the summary (above), SCT members (and other chief financial officers), are currently setting budgets for 2021-22 and the proceeding medium-term. We want to be able to provide the best local services possible. We want to give all the children in our areas the opportunity for a superb education. We want to see our areas recover quickly from the pandemic with school and college leavers gaining the right skills to support local growth. In short, we all want our local areas thrive.

 

However, SCT members, and those in the wider local government sector, are being asked to perform a near-impossible task of producing a balanced budget in a climate of previously unimaginable levels of uncertainty. The list of unknowns is so large that even determining the range of scenarios is difficult. Clearly, we cannot know the answers to all these questions until the publication of the Spending Review, however, there are several areas where the Government and/or Treasury can indicate their intention in order to assist local authorities with planning at this time.

 

It’s unlikely following the Government’s decision to limit the 2020 Spending Review to just one year, but publishing multi-year settlements, in line with the recommendations of the Hudson review, are invaluable to assisting the planning process.

 

It was only recently made public of the MHCLG’s plans to defer the April 2021 business rate reset, affecting accumulated growth and in turn impacting future income and councils’ business rate pooling arrangements. The SCT feel that this could have been announced earlier.

 

Across the country, levels of unemployment are rising; which means that more residents will struggle to pay their bills. In order to support those residents affected by the crisis during the recovery phase, local authorities will need additional funding to provide enhanced council tax reduction schemes (CTRS). The SCT feel that, again, this is something that does not need to wait until the SR’s formal publication. 

 

Following the start of the pandemic, the Government announced a delay to the long-awaited fair funding review; a pragmatic decision supported by the SCT. However, the outcome of the review remains another area of uncertainty for chief financial officers. The SCT has called on the Chancellor to reassure councils on the transitional arrangements that will exist from 2022-23 onwards. Whist not pre-empting the outcome of the review this would enable realistic planning scenarios.

 

COVID Funding & Lost Income

Promises that the sector would receive “whatever it takes” at the start of the pandemic are felt by many to have fallen short. Local authorities received no indication as to what support would be available ahead of the seemingly inevitable second peak of coronavirus cases. To date, SCT returns to MHCLG (“DELTA” returns) indicate a funding gap by the end of the year of £238m, rising to £860m when council tax losses are factored in.

 

Following years of austerity, local authorities are not able to fund this shortfall from reserves without risking their financial sustainability. Even those who can, will find themselves in a position of needing to replenish their reserves in future years.

 

SCT has long stated that the current funding regime for councils is fundamentally broken. Council tax levels in counties tend to be higher; government grant funding lower; the costs of delivery are often higher due to the more dispersed populations so less services are often provided when compared to more urban councils. This is inherently unfair and that is why we continue to push for the Fair Funding Review to be completed and implemented. In the meantime, council tax accounts for 71% of the Core Spending Power for SCT members and it is therefore the lifeblood of counties.

 

The sales, fees and charges income protection scheme, introduced in recognition of the importance of this income stream to district councils, was welcomed but despite this many councils will still be facing large losses in income – most of which are irrecoverable. It is essential that a similar level of support is given to counties with regard to council tax. Whilst councils can, from 2021-22, spread collection fund losses over 3 years, the SCT calls on the Government to ensure that ministers really do “share the burden” of lost council tax income and publish a guarantee scheme before councils are forced to reduce service provision.

 

High Needs Deficit

Local leaders want to provide the very best for all the children in their schools but the DfE’s refusal to address the ever-growing high needs deficit is causing local authorities real difficulties. A 2020 survey of SCT members indicated that reserves will top over £600m by the end of the 2020-21 financial year and, without intervention, are forecast to continue rising in future years. The number of pupils with an education healthcare plan has leapt 25% in the past 2 years alone.

 

The DfE’s guidance that authorities should simply hold a negative reserve does not satisfy auditors who, rightly, see a liability on council budgets with no concrete way of repayment. Despite the DfE’s insistence, in the absence of a way forward to realistically eradicate these deficits, local authorities will be forced to set money aside. As finance professionals, we remain concerned about an approach which is poor financial practice - storing up a problem for government and/or councils rather than addressing the deficit. The outcome of the SEND Review remains outstanding and a long-term sustainable solution is required where DfE take responsibility for their requirements, guidance and funding shortfalls.

 

The Future of Adult Social Care

The Adult Social Care green paper remains unpublished; leaving a critical service without a sustainable future and some of our most vulnerable residents facing escalating care costs. This Government must address this failure if we are to deliver on the priority to deliver high quality public services and “level up” opportunity. Nationally, ASC accounts for 43% (59% in SCT member authorities) of the additional costs of local government’s COVID response. This area was rightly seen as in need of a sustainable funding model before COVID and as COVID cases begin to rise again over the winter, this market could suffer irreparable damage when demand is likely to continue rising in line with national demographics.

 

Devolution

Devolution has thus far been predominantly an urban/city construct and counties are currently missing out. In addition, two-tier structures of local government are inherently inefficient and unitary structures can result in significant savings that are desperately needed, alongside simplified experiences for the public and partners and better outcomes. The devolution white paper is again delayed, with only 3 areas being offered the chance to restructure but with no further devolution policy. It is vital that this area is clarified as a matter of urgency as this will frame much of the financial planning for two-tier councils.

 

We hope this inquiry team find this response helpful and I am happy to be contacted if you require any additional information.

 

 

November 2020