What price failure?

A key section of the report says: “Local authorities’ funding continues to be cut yet the number of statutory duties they have has stayed the same, and in some areas, such as adult social care, the demand for services is increasing.

“If these trends continue there is a risk that the worst-affected councils will be unable to meet their statutory obligations, and that serious questions will arise about the viability of some councils.”

Among the criticisms levelled at the DCLG is that it:

• does not understand the overall impact on local services that will result from funding reductions;
• does not have a clear strategy for responding to and dealing with potential (multiple) failures;
• has not properly engaged with other government departments, for example in modelling how funding changes for local government might adversely affect other parts of the public sector such as the NHS;
• could not provide assurances that money voted by Parliament for a particular purpose had in fact been used to fulfil that purpose;
• failed to make clear how it would monitor councils’ ability to cope with funding changes.

The report raises more questions than answers. What exactly would happen if a local authority takes the view it simply cannot meet its statutory duties? One assumes that the warning signs would be there well in advance. However, what happens next if the conclusion is reached that the organisation is unviable and, say, none of its neighbours are ready or able to assist in its rescue?

John Baker, Head of Local Public Services at Ernst & Young, points out that in the health sector there are a number of government bodies in place – such as Monitor – to oversee the finances of hospitals and foundation trusts and to prevent failure.

“It may well be worth considering whether a similar body or mechanism can be implemented to ensure local governments have a safety net to ensure they continue to deliver public services while implementing cuts,” he suggests.

However, the likelihood of the Government pursuing this idea seems slim – given that it presided over the ‘bonfire of the quangos’ after it first came into power.

The Local Government Association meanwhile would like to see greater protection for local authorities in the next spending round, a review of the range of statutory duties placed on councils and greater devolution of budgeting from Whitehall to local areas.

The Government's much vaunted 'Red Tape Initiative' does not meanwhile have had much impact on local authorities' burdens. It has the feel of tinkering round the edges, rather than amounting to anything radical.

How the DCLG reacts to the PAC report will be interesting. The immediate response from Local Government Minister Brandon Lewis was that “every bit of the public sector needs to do its bit” to tackle the deficit.

Which somewhat ignores the position made by the PAC and the LGA that some (local authorities) are doing more of their bit than others (Whitehall). 

Lewis insisted that council funding settlements were "fair to all parts of the country - rural or urban, district or county, city or shire". Perhaps the DCLG is of the view that the possibility of a council failing is overblown.

The minister meanwhile added: "The government's carefully considered reforms are helping councils achieve greater financial independence and deliver sensible savings while protecting frontline services."