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First, the inevitable cuts will have very different impacts around the country.Local authorities such as Hastings, Knowsley in Liverpool and Brent in London will feel the impact of cuts particularly acutely, as half their local budgets depend on the central government grants most vulnerable to cuts. Cambridge and Wokingham, on the other hand, are far better insulated as just 20 per cent of their budget comes from grants vulnerable to cuts.
Strikingly, of the 30 local authorities which depend on central government grants for more than two-fifths of their budget, 19 are in London and the North West. Local and central government will need to work together to manage the impact of these cuts on different places.
Second, local government’s responsibilities are growing rather than shrinking, not only because they are taking on additional responsibilities (such as public health) but also because demand for statutory services is growing. Child and adult social care take up on average 22 per cent of local authority budgets but in some local authorities it accounts for up to 44 per cent of the local budget, and this proportion is growing with an ageing population and ongoing challenges around unemployment.
Third, that means that the challenge for cities is not just about how much (or little) money they have; it’s also about control. Currently Whitehall controls on average 60% of local government budgets and centralised regulations mean that local government has limited ability to raise additional local revenue. Unless cities gain greater control over how local money is spent, they will be left struggling to respond to local economic circumstances and meet growing need.
So what would we like to see next week? The Single Pot may help support greater local autonomy – although much depends on its size and what else goes along with it (we’ll be publishing a paper on this on Tuesday), but we would also like to see local authorities keep more of the benefits gained from investing in programmes that are more effective and save taxpayers’ money.
To give a tangible example, AGMA has shown that Manchester’s Troubled Families initiative is likely to result in £110 million of cashable savings. Local partners are investing 67 per cent of the up-front costs in this, and yet they only retain 20 per cent of the savings made – the rest go straight back to central government. This reduces the money available, and the incentive, to invest in similarly successful initiatives that could save more money in the future.
The Public Accounts Committee has already identified the vulnerability of local authorities and their services to further cuts. No one is disputing the need to make savings. But cuts without reform will limit the potential for innovation and disincentivise the behaviour that will support better quality, more efficient services. The Spending Review is an important chance to show that the direction of travel is towards greater local autonomy to tackle these enormous challenges.
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