The levelling up bill threatens local authority control over budgets

Paul Dennett
© Gordon Bell/Shutterstock.com

Coverage of the reading of the levelling up and regeneration bill earlier this month was broadly dominated by Michael Gove’s unceremonious shredding of Robert Jenrick’s plans to upend the planning system and a U-turn on government commitments to build 300,000 homes per year. But hidden in the back pages of the bill was another announcement that should be of significant concern for local authorities: the announcement of new powers for the Secretary of State to intervene in local government finances and asset holding.

Under the ‘capital finance risk management’ clause, new powers appear to allow the Secretary of State to cap borrowing and force any council to “divest itself of a specified asset” – powers that have traditionally been reserved only for local authorities placed into special measures.

These powers have presumably been granted in light of the revelations about Liverpool and Slough authorities, both of which underwent deep dives into their audits and accounts by Whitehall, with civil servants making key decisions on their budgets. Nottingham and Croydon Councils are currently facing similar interventions. After 12 years of austerity – which has disproportionately targeted Labour-run local authorities in deprived areas – many more councils will undoubtedly be in financially precarious situations. These new powers will allow for the Secretary of State to make decisions over their budgets without first classifying those authorities as in need of formal intervention.

Britain is already considered to be amongst the most centralised of any state structure in the world – with vanishingly few powers for its local authority areas to raise or levy local taxes, to determine their own area’s priorities for expenditure or to effectively plan for growth and development. All of these are increasingly determined by one-size-fits-all national frameworks, ring-fenced funding (often top-sliced from other pots with fewer restrictions on its usage) and unhypothecated formulae for their distribution.

On top of this, 12 years of national austerity has seen core Revenue Support Grant funding for local authorities cut by more than 50% – putting many local authority areas onto the breadline.

Faced with this situation, many councils (including my own) have taken ambitious steps to become more fiscally independent – primarily through borrowing and the creation of revenue streams through the commercialisation of services, capital investments and rental services. Salford’s capital programme is substantial and has been used in part to finance the creation of MediaCity, a huge asset for our city – and country – and a great source of employment growth and business rates, as well as driving population growth and increasing council tax. MediaCity is the largest hub for digital and tech businesses in the UK outside of London – a prime example of a project helping to ‘level up’ a post-industrial city, attract international investment in research and development and develop the industries of the future. Wise investments elsewhere in the city – including the acquisition of commercial assets and other revenue-generating services – are a key component in shielding local services from the impact of austerity, increasing fiscal self-reliance and fuelling growth.

The new powers announced for the Secretary of State, however, seem to provide no distinction between good and bad council borrowing or investments. The Treasury and central government have a rigid and fiscally conservative approach to book-keeping, with a hugely constrained vision for local authorities, still educated by outdated ‘new public management’ mantra. Local authorities are expected simply to preside over an ever-diminishing list of services, making cost savings by selling off those services and assets to bargain-basement private providers.

Local authorities have a huge potential to play a proactive role in the levelling up agenda, as they possess a wealth of intricate and detailed knowledge of their local areas that is often overlooked by top-down Whitehall mandarins – in additional to a wealth of expertise in the delivery of services, which is nearly universally overlooked and undervalued within our Westminster-centric politics.

The logic of this position appears to be formally accepted in the corridors of power – with a welcome focus on devolution being a central part of the levelling up conversation. Yet time and time again, when new policy announcements are brought forward, the same instinctive drive towards relentlessly restricting local government’s powers and reducing discretion over its spending continues to cut the rug from under our feet.

Government policy towards local government is continually flavoured by an instinctive drive to hollow out, outsource and privatise its services. Insofar as there is a vision for the role of local government at all from Westminster, it is a vision for a ‘commissioning hub’ for local services contracted out to private sector providers, passporting public money into private hands. There is little to no commitment to the idea of local government in its traditional sense – as a provider of services and monitor of local industrial and commercial standards – still less a commitment to a more ambitious role for local government as a key driver in the regeneration of local economies and the empowerment of residents.

If more central funding is not an option for councils, then borrowing and growing asset bases is an essential component of successful local government policy moving forward. But all the messages we are receiving from government suggest that to engage in such activities singles a council out – and leaves it open to having its financial and policy agenda torn up at a moment’s notice.

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