Public services: investing to save

Barely a month after telling the LGA’s Smith Square debate that the Spending Review would kick-off ahead of Parliament’s summer recess (see first 637), Chief Secretary to the Treasury Liz Truss MP has told MPs that this is now unlikely to happen because of the Conservative Party leadership contest.

Meanwhile, her department’s “bloody-minded” approach to local government funding has been criticised by Lord Porter, in his last appearance as LGA Chairman before the Housing, Communities and Local Government Committee.

He told the committee that the Treasury “does not understand that you have to invest to save”, with funding cuts resulting in local government “giving a worse service to the people we look after”, which then costs taxpayers more than it should do.

“It is that inability of the Treasury team to look forward at how to invest in the communities we all look after. It is always about understanding the cost of everything and the value of nothing,” he said.

In response to a question about use of reserves, Lord Porter said: “One-off investment that might bring down costs in the future is a good use of reserves, but using them to pay the electricity bill is insane.”

He warned that people could die because of the lack of sustainable funding for adult social care, pointing out that money had been found for the NHS.

“If the Government thinks the policy going forward is to spend all your reserves, and then we will find some new money to give you after you have spent all your reserves, the first serious shock will be when a Secretary of State has to stand up and explain to the public why those people died because the money was not available,” he told MPs.

“Why do we need to lose people because of money? We have choices about where we spend it; we just need to make better choices.”

The importance of business rates as a source of income for councils, the impact of online retailing and out of town developments, the need for flexibility around reliefs, and the need to tackle the effect of business rates avoidance were raised at another evidence session, held by the Treasury Select Committee.

Cllr Richard Watts, Chair of the LGA’s Resources Board, told the committee that local authorities relied on the income from business rates to deliver services, particularly as they currently face a funding gap of an estimated £8 billion by 2024/25.

He told MPs, who are looking at the impact of business rates on businesses, that business rates income is not “filling in the gaps”, but is “the fundamental core” of the local government funding system – “fundamental to our future financial survival”.

He also highlighted the impact of outstanding business rates appeals on the level of reserves that local authorities have to hold.

“We estimate that something like £2.6 billion is currently sitting in local authority bank accounts that could be used on critical local services under pressure but are being retained, at the moment, to manage the risk of appeal,” he told MPs.

You can find out more about the LGA’s parliamentary work in our latest annual report, ‘LGA in Parliament 2018/19’, free to download at www.local.gov.uk/parliament. The full transcripts of the LGA’s evidence to select committees is available at www.parliament.uk – search by committee name.

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