An independent voice

If he hasn’t read it already, new Communities Secretary James Brokenshire should take a look at the National Audit Office’s recent report on the financial sustainability of local authorities.

So says Abdool Kara, former Chief Executive of Swale Borough Council and now, since February 2017, Executive Leader, Local Services, at the spending watchdog.

The report warns that councils’ financial health is getting worse, as they struggle “to juggle higher demands and cost pressures against significant central government funding cuts of nearly 50 per cent since 2010/11” (see first 622).

It is also critical of government’s departmentalised understanding of the sector, saying it has “no single view of how funding cuts are impacting the whole of local authority services”. At a time when councils are prioritising social care spending, this unintentionally risks reducing local services to a “core o ering centred on social care”.

Mr Kara says the Ministry of Housing, Communities and Local Government (MHCLG) has made progress on “knitting together a wider picture” of local government services, but it’s “not yet where it could or should be”.

“There are 13 departments that have some interest in local government services and the accountability statement by the MHCLG is clear about its role, but perhaps slightly less clear about other departments’ roles,” he adds.

“Our report is clear that the next comprehensive spending review (CSR) is a real opportunity and an important time to bring that all together. We’re happy to support the ministry in thinking about how it might do that. It’s a fairly challenging job.”

Mr Kara identifies social care – both children’s and adults’ – as probably the two biggest financial challenges facing councils, with homelessness also picking up, particularly in London and the South East.

“Our general exhortation to the sector is always understand your cost drivers, and understand the reasons for variations across local authorities,” he says.

“There is lots of experimental work going on with things like assistive technology in adult social care, and looking at machine learning and big data for spotting patterns of need, and [developing] early intervention and prevention around patterns of need.

“We see an awful lot of innovation across the sector – driven, in part, by need, partly by the financial challenge.”

The National Audit Office (NAO) is doing some work on the health and social care interface, to coincide with the LGA’s annual conference in July, where Comptroller and Auditor General Sir Amyas Morse will be speaking. Later this year, it is also due to publish a report on children’s social care.

“That is looking very much at the evidence around demand management, early intervention and prevention, to reduce needs and, therefore, costs,” says Mr Kara.

“I think our work shows that the adult social care sector is probably slightly further advanced than the children’s social care sector in terms of self-improvement, understanding good practice, best practice models and so on. Children’s social care needs to catch up on that side.

“The Association of Directors of Children’s Services is aware of that, and there is a lot of support coming through, both from the LGA and the Department for Education. The department has research looking into demand management and different practices across local authorities. It’s an area where there are a lot of players and activities… and something we will continue to keep watching brief on.”

The perilous state of the private care- home market – which the LGA estimates needs an immediate cash injection of £1.3 billion to prop it up – is another risk factor for councils struggling with social funding and rising demand for services.

Earlier this year, the NAO published a report on the adult social care workforce, which said the Department of Health and Social Care is not doing enough to support a sustainable social care workforce.

It called for a “robust” national workforce strategy, and for the department to invest more to enable service commissioners
to set appropriate fees for providers, so they can pay staff adequately and afford to offer staff career development and training opportunities.

Local authorities have a statutory duty to manage their local care markets, but Mr Kara suggests that most councils aren’t big enough to do this on their own.

He adds: “You can only start that process [of managing care markets] from understanding your local providers, and that’s not just numbers, but different types of care, the pro le of different providers, and the financial risks they face.

“We know that some of the bigger social care providers across the country have had challenges – we saw Southern Cross close
a few years ago. So we would always say to local authorities, start from an understanding of both the financial risks and the workforce risks, which was what our workforce report was about. How exposed are you to a threat of a reduction of workers from EU withdrawal, for example? It’s only from that evidential starting point that local authorities can then plan.

“Understand the risks. If all the care homes in your area are about to go under, how would you prevent that, and what would your contingency arrangements be?”

In children’s services, Mr Kara identi es the availability of specialist provision as a nancial and service challenge, leading to children in need being placed far away from home. Rising needs and demand are also outstripping funding for special educational needs (SEN), and an NAO report on SEN is due out later this year.

Meanwhile, Mr Kara’s team is in the middle of compiling a series of reports on housing issues. Last September’s report on homelessness concluded the problem had increased across all measures since 2010, “with many local authorities now seeing it as a risk to their financial sustainability”. Mr Kara highlights how welfare reform has been a contributory factor in rising homelessness – something acknowledged by the MHCLG – alongside the failure to build enough new homes for 30 or 40 years, and rising costs in the private rented sector.

“If tenants can’t afford a rent because of the local housing allowance rate – and that’s what’s made them homeless – then, if they are staying in the same area, why would they suddenly be able to afford a rent unless their circumstances changed – they got a job, or an older child left the household?

“We’re seeing that constant pressure. While the Government has put in some fairly high-pro le initiatives and targets, rough sleeping – while worse for the individual involved – is a much smaller problem in quantum terms than statutory homelessness, where people are living in temporary accommodation, whether that’s B&B, leasing or hostel.”

New duties on councils to help prevent homelessness came into effect in April, supported by some funding from government, but Mr Kara said he would be surprised if more money was not needed when progress is reviewed.

Meanwhile, the NAO is working on new reports on planning’s role in housing delivery (due early 2019) and the Government’s multi- billion pound ‘Help to Buy’ scheme (due spring 2019).

Next year will be a critical one for local authority financial management. Mr Kara notes there will be a number of changes coming into play, as a result of moves towards 100 per cent business rates retention, the ongoing fair funding review, and the comprehensive spending review.

“That has the potential to create significant winners and losers, and what always happens – this is not a party political point – is you then have transitional arrangements. So the transitional arrangements in themselves become a bit of a political football about how fast you ‘damp’ those changes,” he says.

“Irrespective of anything else, a lack of long-term nancial certainty – even if it’s reductions [in funding] – militates against good, long-term nancial planning.”

The NAO reported last year on implementing business rates retention, noting risks and concerns.

“There will be winners and losers. Some places will grow faster than others. Some places will have their demand and costs go up faster than business rates might go up,” says Mr Kara.

“The Government has already said there will continue to be a redistributive mechanism, and we understand the desire for there to be an incentive mechanism. The balance between the two is really for government to determine, while noting the risks.

“For example, the incentive within business rates is to grow companies that have floor space – and they aren’t always the most cutting edge or value adding, value-generating types of business. We are effectively saying to the Government, think very carefully about if this is your intention.”

Mr Kara is keen to emphasise the NAO’s interest in local public services. His own role is outward facing to the local government sector, and he also covers education, skills and health. The NAO wanted to recruit someone who understood the sector and was well-connected to it, and four of its ve board members have particular interests in local government and services.

“The majority of the sector is pleased to have a powerful, independent voice, such as ourselves, speaking compellingly to Parliament about what is happening in local government,” he adds.

“At the moment, we feel very welcome. That might not always be the case, but I can’t imagine it won’t be for the next few years.”

For more information about the National Audit Office,
please visit www.nao.org.uk.