Every day, a new story emerges about the spiralling financial crisis in local government. If it isn’t a new council announcing mammoth cuts to simply stay afloat, it’s new data revealing how a vital local service is facing meltdown. The government, however, seems uninterested. Extra funding is going in only one direction – towards the NHS in the form of the £20.5bn “birthday present” announced by the Prime Minister in June.
One day, students of public finance will study this as an example of policy-making at its most irrational. The £20.5bn was announced as a response to the rapidly rising demand, which is stretching NHS services to snapping point. But if councils are left to fall apart that demand will only rise further and faster.
This is because councils do the things that keep people from bothering the NHS in the first place. They make sure the elderly and people with disabilities are cared for. Councils keep roads, town centres and businesses safe and clean. Their public health teams educate local communities about how to stay well. They expend a great effort on steering troubled children away from drugs, self-harm and mental illness.
Maybe more fundamentally, councils are tasked with providing the housing and local business investment that gives people the decent homes and jobs that all research shows is vital to better physical and mental health.
So far, the government has avoided confrontation with the absurdity of its position by claiming that the problems facing councils are all the result of local mismanagement. Northamptonshire, the first council to effectively declare bankruptcy in decades, has been subjected to a convoluted inquiry and structural re-organisation in an effort to pin the blame on local leaders.
But as the number of councils declaring themselves to be in severe financial straits has grown over the last few weeks, the government’s line is looking increasingly detached from reality. The conclusion that the real cause of the crisis is the 50 per cent cut in government funding councils have endured since 2010 is becoming unavoidable.
No doubt the Treasury’s next move will be to shift money around within the overall budget for councils to bail out those facing immediate difficulties. There is an obvious opportunity to do this given a review on how council funding is allocated will report very soon.
The government may buy some short-term respite by shifting funds to struggling councils but if that comes at the expense of withdrawing even more funds from other councils then the problems will only re-emerge elsewhere.
The Chancellor could avoid these undignified and self-defeating manoeuvres easily: spread the £20.5bn of love directed at the NHS more widely. If that money is genuinely to be used as a response to rising demand then sharing it with local government makes far greater sense than blowing it all on the health service.
How much would need to be shared? The Local Government Association has estimated that councils need an extra £7.8bn just to keep services at their current rather threadbare level over coming years. But there is more to it than that.
Such significant funding shared between the NHS and councils could, if positioned right, enable a major shift towards a system built around preventing people getting ill in the first place rather than being treated once they do. A great partnership between the two biggest providers of public services in the country to keep people healthy and out of hospital. The benefits to the economy, the public finances and simple well-being could be huge.
Adam Lent is director of the New Local Government Network
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