Isabel Hardman

Whose fault is the local government funding crisis?

Whose fault is the local government funding crisis?
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Local government appears to be on its knees, and it's not the usual suspects of authorities run by opposition parties who are complaining loudest. Today, Surrey County Council is revealed to have a £105 million funding gap, and this after Northamptonshire issued a Section 114 notice, which bans almost all new spending.

Organisations such as the Taxpayers' Alliance argue that Surrey still managed to find additional money for its chief executive, suggesting that this is still a story about inept management of local government finances. Perhaps, but it's also worth looking back at how the funding crisis began.

In the 2010 Comprehensive Spending Review, one of the first departments to settle early with the Treasury was Communities and Local Government, then led by Eric Pickles. An early settlement usually means that a Secretary of State largely agrees with the cut being suggested by the bean counters, and in this case that was exactly what happened. DCLG took the largest cut of all the departments, with direct grants to local government falling by 27 per cent. Pickles was rewarded for his cutting endeavours with a seat on George Osborne's 'star chamber' Cabinet committee, which threatened to impose cuts on other less forthcoming departments.

At the same time, local authorities were handed new responsibility for spending decisions, particularly with regard to vulnerable people. And so ministers ended up making two apparently contradictory arguments: that local government had become bloated and could take the cuts, and that local government was best-placed to make decisions affecting local people. Bloated councils can still be agile and sensitive to local needs, but the tension between these two pitches on policy suggested that local government was also being set up to be blamed for making the 'wrong decisions' which were actually just decisions forced upon councils by central government cuts.

Some of those decisions naturally ended up being cuts to what people had previously been entitled to, particularly with regard to social care. It is easy to reduce the entitlement of someone who is just entering the system, because they don't tangibly lose anything. It's just that the new service user receives a lot less than someone who had come under the local authority's responsibility five years previously. But now authorities are so strapped for cash that it isn't just those silent cuts, but changes to much more visible budgets, such as children's services. And even the 'silent cuts' in social care have become a crisis.

Now, that's not to say that local government has handled these cuts in the best way possible. The Chartered Institute of Public Finance did point out that 'other councils in a similar situation [to Northamptonshire] have successfully managed their budgets'. Council chief executives do often earn more than the Prime Minister, and Northamptonshire is considering selling its £53 million headquarters - which are brand new and only opened in October 2017.

This does raise the question of whether, even if those draconian cuts back in 2010 were justifiable, ministers were justified in believing that councils had the ability to manage their new finances properly. It may well be the case that for some councils, the cut was unjustified and the authority in question lacked the ability to make the best of a bad deal.

Either way, the flaw in trying to devolve spending pots to local government in order to blame councils for certain cuts is that it can only take you so far. A below-par councils who struggle to tighten their belts is one thing, but when Tory councils across the country are starting to complain that they simply cannot deliver their basic responsibilities, then it becomes a problem for central government once again.

Written byIsabel Hardman

Isabel Hardman is assistant editor of The Spectator. She also presents Radio 4’s Week in Westminster and is author of Why We Get The Wrong Politicians.

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