Inlogov Faculty Awayday Beyond the Jaws of Doom · Total spending has remained stable and some are continuing to borrow\爀 屲However, increasingly focus of capital activities is

Inlogov Faculty Awayday

Beyond the Jaws of Doom May 2017

Issues facing local government…

• Finances • Devolution • Brexit • Industrial Strategy • Health and social care • Social Cohesion • Young people • Future workforce • Future councillors

Closing the funding gap….

– the challenge facing LG finance to 2020

– recent trends in capital spending

– looking forward to 100% business rate retention and its potential impact

Funding challenge | view forward to 2020

• Reductions in spending power continue up to 2017-18, but then spending power returns to growth (in cash terms).

• The beginning of the end of austerity?

60.0

65.0

70.0

75.0

80.0

85.0

90.0

95.0

100.0

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

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LBCs MBCs CCs UAs DCs

Funding challenge | Grant funding decreases

• Continuation of reductions in government funding (FG/SFA and BRR)

• Rate of reductions stays the same post 2016-17

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50.0

60.0

70.0

80.0

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2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

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Funding challenge | Financial sustainability of local authorities

Overview | Demand pressures on local services The population is ageing, putting pressure on health and social care services

Source: Office for National statistics 2012-based population projections for England

Source: Department for Education Source: NAO analysis of Office for National Statistics 2011 census data

Overview | Capital and revenue spending

In 2014-15 LAs had service spending of: • £38.1 billion

on revenue (excl. education)

• £12.3 billion on capital (excl. education)

• Revenue spend has fallen every year since 2010-11

• Capital spending fell from 2010-11 to 2012-13, but recovered by 2014-15 - driven by housing, transport and local growth

• Overall real terms increase in capital spend of 5.4% from 2010-11 to 2014-15 £

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£20

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£45

2010-11 2011-12 2012-13 2013-14 2014-15

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Revenue Capital

LA capital | Capital expenditure – key trends

Change in revenue and capital spend, 2010-11 to 2014-15

-60.0%

-40.0%

-20.0%

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20.0%

40.0%

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services

EnvironmentalServices

Central Services Transport Housing Social Services Culture &Related Services

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Change in revenue and capital spend by service, 2010-11 to 2014-15

LA capital | Capital expenditure – service patterns

• All service areas have seen reductions in revenue spend from 2010-11 to 2014-15

• Most service areas saw increase in capital spend • Planning – driven by new

growth funding • Transport – increase in DfT

funding • Housing – growth from 2012-

13, possibly driven by re-invigorated RtB

• Big reductions in cultural services spend • 29% cut in culture and

heritage • 33% cut in spend on open

spaces • 60% cut in spend on libraries

LAs with a reduction in capital spending from 2010-11 to 2014-15 (% of authorities)

Median change in capital spending 2010-11 to 2014-15 (% change in spend)

London boroughs 45.5 7.2

Metropolitan districts 72.2 -20.1

County councils 37 9.5

Unitary authorities 35.7 15.2

District councils 50.7 -1.2

Total - all authorities 49 1

LA capital | Capital expenditure – local variation

• Despite aggregate growth in capital spend across the sector – not all LAs saw growth: • 49% of LAs saw a decline in capital spending from 2010-11 to 2014-15 • 72.2% of MDCs saw a reduction • MDCs had a median reduction of 20.1% in capital spending • These LAs have also seen the greatest reductions in revenue income since 2010-

11

• PWLB remains the main source of borrowing – 73% of gross external debt

• But LAs are looking for other, better value sources of finance

• Inter-authority lending – both short and long term – has increased since 2010-11

• It provides: • Better value to borrowers than

PWLB • Better value to lenders than

bank deposits • Greater protection from

counter-party risk to lenders

LA capital | Reducing capital costs to revenue – borrowing from lower cost lenders

© Institute for Fiscal Studies

Reform | A big shift in councils’ funding • 100% business rates retention: culmination of big shift back from

central to local funding of councils

0%

10%

20%

30%

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2009-10 2015-16 2019-20, existing system 2019-20, full retention

Grant Council tax Business rates

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Reform | Issues and challenges – key trade-offs

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Some areas can grow BR much faster than others

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Change in gross gross rates payable 2010-11 to 2015-16

Reform | Issues and challenges – delivering growth

Link between BR and economic growth is not direct

Reform | Devolution is shifting towards public services Government’s devolution to local places increasingly covers growth and local services (e.g. health, social care). Greater Manchester wants an integrated approach, in which local people’s dependency on services is reduced and benefitting from the proceeds of economic growth are retained locally.

Pooled funding Multi-agency responsibility Multi-year certainty Joined up thinking Local autonomy

Regional Growth Fund

City Deals Growth Deals

Devolution Deal

Community Budgets

Troubled Families

Transfer of Public Health

Better Care Fund

2010 2011 2012 2013 2014 2015

Growth Manchester Devolution

Responsibility for health services, and forgrowth, enabling an integrated ‘whole system’ approach. Police & fire to be folded in.

Public service reform

Discrete funding streams Ring-fencing Silo based working locally Single year settlements Uniform national arrangements

Devolution • Mayoral elections in May in six areas (including West Midlands). • Committee of Public Accounts (PAC) report into ’Devolution in

England: governance, financial accountability and following the taxpayer pound’ recommended: – Clarity is needed about devolution’s objectives and outcomes. – Clarity is needed about who is accountable for public spending in

devolved areas. – Clarity is needed about the intended link between devolution and

economic growth. – Adequate local resources are needed to govern/scrutinise public

spending in relation to devolved budgets. – Adequate local resources are needed to deliver devolved and

integrated health and social care. – Devolution must avoid ‘local centralism’ where power and decision

making sits in the dominant city heart of a combined authority.

Brexit

• Article 50 triggered 29th March. • If no agreement reached by 29 March 2019 the UK

would still leave the EU but without provisions for its future trading and legal relations with the EU.

• Can revoke during the two years (probably). • Will impact on regulatory framework, procurement

rules, environmental protection, employment rights… • LAs have close links with Europe (the first European

regional office in Brussels was set up by Birmingham in 1984 – there are now 18 regional and local association offices there).

Industrial Strategy • Green Paper ‘Building our Industrial Strategy’ consultation ended

17th April. • Ten ‘pillars’:

– Two direct drivers of productivity improvement – science, R&D, and world-leading sectors

– Five enablers of growth – skills, infrastructure, business support, energy, and procurement

– Two geographical domains – international trade and investment, and spreading growth across the country

– Institutional leadership of growth – both sector and place-based, and bringing these together.

• Consultation response issues: – Broader definition of growth ambitions (inclusive growth)? – Replacement for EU Structural Funds?

Health and social care: integration • Various care models and policy initiatives have been

developed over the last decade, among them: – Integrated Care and Support Pioneers Programme; – Multispecialty Community Provider (MCP) vanguards; – Integrated Primary and Acute Care System (PACS)

vanguards; – Better Care Fund (BCF); – Sustainability and Transformation Plans (STPs); – Devo Health – in particular, the Greater Manchester

initiative. • Critical success factors include incentives; knowledge;

skills; governance and relationships.

Health and social care: sustainability and transformation plans • Area-based plans to improve quality and safety, and to

make services financially sustainable through reducing demand.

• Key themes found in plans are: – changing the role of acute and community hospitals – redesigning primary care and community services – strengthening prevention and early intervention – improving mental health and other services – workforce – developing enablers – developing organisational arrangements to support STPs.

• CCGs and local authorities are likely to become ‘strategic commissioners’ often working across bigger footprints.

Social cohesion • Cohesion includes:

– Common shared vision of progress socially/economically – Shared sense of belonging. Britishness is a contested concept. – People from different backgrounds have similar life opportunities – Strong positive relationships are formed with people from different

backgrounds. High levels of trust amongst one another and local institutions.

– Widespread knowledge of each citizen’s rights and responsibilities. • Following the EU referendum there was a sharp increase in the

number of racially or religiously aggravated offences recorded by the police. In July 2016 the recorded number of offences were 41% higher than in July 2015.

• Council contributions include English classes, investment in public spaces, libraries and volunteering networks.

Social cohesion – Casey Review • Casey Review initial recommendations:

– Providing additional funding for area-based plans and projects such as the promotion of English language skills, empowering marginalised women, promoting more social mixing, and tackling barriers to employment for the most socially isolated groups.

– Developing a set of local indicators of integration and regular data collection. – Identifying and promoting successful approaches to integration.

• Improving the integration of communities in Britain by establishing a set of values around which people from all different backgrounds can unite and by:

– Attaching more weight to British values, laws and history in schools. – Considering additional support or advice to immigrants to help them get off to the best start in understanding their rights and

obligations and the UK’s expectations for integration. – Reviewing the route to British citizenship and considering the introduction of an integration oath on arrival for immigrants

intending to settle in Britain. • Measures to reduce economic exclusion, inequality and segregation in the most isolated and deprived

communities and schools, by: – Working with schools providers and local communities to promote more integrated schools. – Developing approaches to help overcome cultural barriers to employment. – Improving English language provision through funding for community-based classes. – Improving our understanding of how housing and regeneration policies could improve integration or reduce segregation. – Introducing stronger safeguards for children who are not in mainstream education, including those being home schooled.

• Increasing standards of leadership and integrity in public office, by: – Insuring that British values such as respect for the rule of law, equality and tolerance are enshrined in the principles of public life – Developing a new oath for holders of public office.

• Critics have pointed out that the report does not reflect the effect of government cuts on attempts to promote cohesion.

Social Mobility

• Britain has a deep social mobility problem, which is getting worse, according to the Social Mobility Commission’s State of the Nation 2016 report.

• Identifies four ‘fundamental barriers’ holding back a whole tranche of low- and middle-income families and communities in England: – an unfair education system – a two-tier labour market – an unbalanced economy – an unaffordable housing market.

Young People • National Policy announcement expected to target resources

to those most in need and require the sector to diversify their incomes to increase impact.

• Local authorities across the UK are increasingly turning to new service delivery models (e.g. social enterprises).

• Councils plan to spend 15% less on services for young people in 2016/17 than the previous year, and around half of what was invested in 2010/11.

• Charlie Taylor review of Youth Offending recognises the extreme vulnerability of the current cohort of youth offenders and enables LAs to create more therapeutic systems to prevent re-offending [current WMCA review o this area].

Young people: schools

• Autumn Statement ambition to “make local authorities running schools a thing of the past”.

• Funding formula for consistent treatment of pupils across the country with similar needs.

• The ‘hard’ National Funding Formula (NFF) will commence in April 2019 for the 2019/20 financial year, with a ‘soft’ NFF in 2018/19.

• 46% of schools and 36% of pupils in England losing resources and these are mainly located in Inner London and other urban areas.

Future Workforce 21st Century Public Servant (University of Birmingham) • Municipal entrepreneur, undertaking a wide range

of roles. • Co-productive, engaging with citizens in a way that

maximises pooled expertise • Strong generic skills • A career which is fluid across sectors and services. • An ethos of publicness with an understanding

of commerciality. • Can operate in an era of perma-austerity • Needs fluid and supportive organisations, not

siloed and controlling ones. • Rejects heroic/top down leadership in favour

of distributed and collaborative models of leading. • Is rooted in a locality which frames a sense of

loyalty and identity. • Is reflective and continuously learns.

UoB is currently working with WMCA on how this applies to public service reform in WM.

LGIU summarise the five critical LA workforce challenges as: • Ensuring the required skills and capacity are in

place to address issues relating to place leadership. These include devolution, combined authorities, health/social care integration, STPs, transport, and economic growth. The specific workforce implications of place leadership include the need to invest in shared language, culture, approaches to workforce planning, and talent management across different organisations which are seeking to join up.

• Ensuring that change is well planned, and positively but realistically positioned so that the workforce does not suffer from ‘change fatigue’ or burnout.

• The need to move to more flexible organisational structures and more flexible approaches to employment

• Continuing to attract and retain a high-quality and diverse workforce

• Fully understanding and developing mitigations to address the possible impacts of Brexit on the local authority workforce.

Future Councillors The UoB 21st Century Councillor research found that there are a number of contextual changes which are reshaping what it means to be a local councillor. These are: • Perma-austerity –the financial context facing local authorities

shaped all interviewee responses. It was the most dominant response.

• Changing citizen expectations – councillors reported a shift in relationships with citizens, brought on by technological change, austerity and other social changes.

• New technologies – councillors recognised that new technologies are introducing opportunities for real-time engagement with a broader range of citizens, but had reservations about the potential for inappropriate use of social media and about how much of their personal lives should be shared.

• Different scales of working, including combined authorities – whilst there was enthusiasm for the idea of powers being devolved from central government many councillors expressed concern at the complexity of the new arrangements and the lack of democratic mandate.

• Changing boundaries and organisation of public services at local level – councillors were struggling to reconcile accountability to citizens for decision making with the increased complexity and diversity of service delivery structures over which they had reduced direct control, for example due to the growing importance of community involvement, the variety of service providers or the growing number of academy schools.

The 21st Century Councilllor research concluded that the key roles for councillors in the future include: • Steward of place – working across the locality in partnership

with others

• Advocate – acting to represent the interests of all citizens

• Buffer – seeking to mitigate the impact of austerity on citizens

• Sense maker – translating a shift in the role of public services and the relationship between institutions and citizen

• Catalyst – enabling citizens to do things for themselves, having new conversations about what is now possible

• Entrepreneur – working with citizens and partners to encourage local vitality and develop new solutions

• Orchestrator – helping broker relationships, work with partners and develop new connections