Monthly Archives: June 2012

An insight into all our futures?

Graeme McDonald, Director of Policy and Communications at SOLACE, posts his reflections on the LGA finance report:

Two events this week may have given us an uncomfortable view into the future. The LGA’s report: Funding outlook for councils from 2010/11 to 2019/20, painted a bleak picture of the funding of local public services.

Our aging population and the rising costs of care is a well told story, but we were given a stark insight into its fundamental impact across local government. It is now clear just how social care and waste services will dominate local government finance and consume a huge percentage of the local public purse.

But this week also saw the South London NHS Healthcare Trust become officially ‘financially unsustainable’. Three hospitals have notified Andrew Lansley that they will be to be put into a form of administration within weeks and are losing around a million pounds a week. This was closely followed by serious concerns being raised Care Quality Commission, with it reporting that the hospitals were delivering unacceptable levels of care.

The blame is being placed firmly at the door of their PFI deal which is costing them £61million per year but, having already received part of a £1.5billion ‘bailout’ this year, there are some considerable underlying financial problems across parts of the NHS.

Bringing these two stories together begs the question, might the same happen in local government? Can we foresee an authority going bust?

To date many frontline services have been protected but ever more difficult choices are being made. Public concern at service closures will only be heightened as we continue along this path and this will heap even more pressure on authorities to take larger financial risks.

But if the LGA’s conservative estimates make difficult reading, it must be remembered that it focuses only on the aggregate or the average. In some authorities the funding gap will become critical far more quickly.  Different areas of the country will be affected in different ways. There is a diversity of crisis, but crisis it is.

Social care is rightly highlighted as a key driver of cost. Authorities with those responsibilities will feel the immediate impact with their demographic determining its pace. But it is simplistic to look solely at social care costs. An authority’s income base will also have a profound impact on its ability to cope with austerity. Those authorities reliant on government grant to support significant proportions of their spending will have far less flexibility to respond. The LGA report assumes council tax rises of 2% after April 2015, but if you are proportionately more reliant on the government for your income, this is assumed to continue to fall.

So should we expect headlines focused upon local council’s being financial unsustainable or put into ‘administration’? Given local government’s success in managing austerity to date, I feel we should expect the best, but plan for the worst.

The sectors self-improvement work has done much to ensure checks and balances are in place to pick up problems early. Members and officers are working closely to ensure communication channels are open and transparent, that lessons are learnt and shared quickly. The strength of local government comes from its collaboration and openness. We should encourage all in the sector to work with others, to use their networks and support those in more challenging positions.

But local government cannot solve this problem alone. Government does need to make some early policy decisions, most obviously on social care reform and community budgets. It should also support local government and ignite a real debate about the future of public services and how they are paid for. More honesty about what can be achieved is required, as is more openness to engage local communities in the production and commissioning of services. This week we have heard some sobering messages, so we must remember that from the greatest challenge, can come the greatest creativity.

 

First published on the Guardian website on Friday 29th June 2012

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

 

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The housing story from Crawley

Lee Harris, Chief Executive of Crawley Borough Council and SOLACE Lead on Housing Policy posts his views on the Communities and Local Government Select Committee’s report on the Financing of New Housing Supply.

I’m glad to see that the issue of homelessness and housing supply is receiving more public attention.

First a bit of background before I share our story.Crawleyis a post war “new town” which has grown rapidly from small beginnings to over 100,000 people.  It is home toGatwickAirport(20,000+ jobs) and the Manor Royal Business District (30,000+ jobs). There are some 42,000 dwellings in the town. Approximately 69% is owner-occupied, 23% social rented (including over 8,000 council homes) and 8% private sector rented.

The story in Crawley over the last couple of years is one of rising homelessness.  You will all be aware of the social and financial pressures that this creates. For example, homelessness applications have increased from 244 in 2009/10 to 389 in 2011/12 and are projected to rise throughout 2012/13. Homelessness acceptances have almost doubled from 83 in 2009/10 to 150 in 2011/12.

A few years ago (2009/10) we had no one in bed and breakfast. Now we have over 60 households, sadly including 40 families and yes, regrettably, some are placed out of borough.  Most of this is short term.  On the positive side, we’ve done a lot of work to reduce demand for social housing by utilising the private rented sector and in particular we’ve worked hard with our County Council colleagues to eliminate homelessness amongst 16/17 year olds.

The increase in homelessness has not been from the usual family exclusions route.  This was 42% in 2009/10  but has fallen to 28%.  The worrying trend has been the dramatic increase in people who have come to us because they’ve lost their private rented home. In 2009/10 this stood at just 9%. It is now 45%.

What we are seeing is a shift in behaviour as people who would have moved into home ownership are less able to access this market.  These households can afford the mortgage payments but can’t get the mortgage finance, generally through a lack of deposit. They therefore move into or remain for longer in the private rented sector, because they can afford market rents. This is compounded inCrawley where market rents are lower than the surrounding areas, such asSouth London, and hence we are also finding that households are moving intoCrawley.  We also have work which is attractive.

We are finding that lower income local households are being priced out of the private rented market and are coming through our doors as homeless.  It is increasingly difficult to source temporary accommodation from the private sector and to help these low income households via our rent deposit schemes.  Landlords tend to prefer working households and are uncertain and uneasy about the welfare reform impacts.

These circumstances are also dampening the supply of new housing and new starts have significantly reduced, from a peak of almost 700 in 2007/08 to some 380 in 2010/11, and reducing further.

This leads me to conclude that the best way of reducing our homelessness problem is for the Government to take steps to get the housing supply market moving and break the log jam that is preventing people from moving into home ownership and the private rented sector from expanding.  The Select Committee identified three key blockages – land supply, planning and finance. The first two look like a way to bash local government.

In the short to medium term in Crawley, this is not really about planning and sites and so I don’t feel that the Select Committee’s recommendations in this respect are terribly helpful to my area.  There’s also a fixation with Right to Buy.  Whether or not a tenant buys their home does nothing to increase overall supply as the home is occupied!  I also don’t believe the solution lies in simply building more public sector housing, although this will help.

The recommendations in the report about freeing up local government’s ability to borrow are encouraging and should be supported from a localist perspective; however, in Crawley we have taken on a £260m housing debt to exit the Housing Revenue Account and, rather than worry about borrowing headroom, my Members have taken a bold decision to repay interest only on the loan for the first 10 years and to use the significant balances built up to invest in new homes.

I think the big challenge is to make it easier for developers and home buyers to access finance and to improve the viability of schemes to get the housing market moving.  In my view the Select Committee has struggled to find any meaningful recommendations.  The request to review the Government’s NewBuy Guarantee scheme feels a bit lame and I think that SOLACE should be pressing the Government to do more to make the finances for house building stack up for developers, owner occupiers and private landlords.

These are my views from Crawley’s story – if you’re a member of SOLACE, why not let me know what you think or respond to SOLACE’s discussion paper on the funding of new housing supply?

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

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Resource review risks costly two tier system

The Government’s Local Government Resource Review consultation paper asked the question:

“Do you agree that the current system of business rate reliefs should be maintained?”

Taken at face value this implies that the current mechanism, whereby central government funds local government for discretionary and mandatory relief granted to charities and not-for-profit organisations, should continue.

However, the detail of the consultation question makes it clear that the Government is only considering continuing to provide funding for current reliefs that are funded, via adjustments to tariffs and top ups. There is no guarantee that the Government will continue to offer local authorities support for mandatory and discretionary reliefs granted after the new scheme has begun.

This runs the risk of two potential scenarios:

• A two-tier system of reliefs being granted by local authorities – those granted prior to local retention of growth in business rates and those granted after. The ones granted after could potentially be subject to a much lower level of relief.

• A post implementation approach to the granting of discretionary relief which is much reduced compared to the current system as local authorities will be unable to afford to continue funding these reliefs. In order to ensure consistency, this could see organisations that currently receive discretionary relief having it removed.

With the current financial climate that Councils find themselves in, there are already some authorities who feel they cannot afford to continue to grant discretionary relief. If central government no longer funds mandatory or discretionary relief related to charities and/or not-for-profit organisations then local government will be even less able to afford this in the future.

The potential impact on charitable and not-for-profit organisations under the current proposals for the new scheme is significant. Local authorities might urge the Government to reconsider its proposals and agree to continue with the current approach of fully funding mandatory relief and part funding discretionary relief. This will ensure that invaluable third sector organisations continue to receive the levels of support that they currently rely upon.

One of the Government’s headline aspirations on coming to power was the development of the Big Society and the use of charities and the third sector to help deliver public services. If the Government no longer funds mandatory and discretionary relief for these organisations then the development of the Big Society risks being drastically reduced.

In addition, if all schools that convert to Academy status are awarded at least mandatory relief, then this could also be a significant drain on local authority resources, removing even more funding from crucial front line services.

Greater Birmingham and Solihull LEP Finance Officers

Contact: Paul Johnson, Director of Resources, Solihull Council (pjohnson@solihull.gov.uk)

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

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