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Local authorities have been in the news for all the wrong reasons as the fragility of their finances show that many are on the brink of collapse with demand for services rising higher than their budgets allow. With less money comes difficult choices and some of those have a direct impact on the emergency services.
In the second series of webinars from Emergency Services Times, Professor Pete Murphy from Nottingham Trent University and Stuart Hoddinott from the Institute for Government looked at why the decisions local authorities make today will affect their blue partners in the longer term.
Pete explained that the problem of local authority finance is not new, with a recent report called Financial distress in local authorities, from a select committee of MPs simply the latest in a long line of organisations examining why local authority financing doesn’t work. The long term reduction in the amount of money going to local services combined with increased demand for services has created a perfect storm. That demand, Pete says, comes from an ageing population, increasing inequalities in both health and wealth and the high cost of services to assist the most vulnerable in society.
Don’t mention the ‘b’ word
What we are talking about is bankruptcy but the ‘b’ word is not used and Stuart concedes that it is useful shorthand for the public and media alike as the reality is that a local authority finance chief would issue a section 114 notice indicating that the local authority cannot balance its budget. It doesn’t mean all services will stop but it does mean new expenses can’t be incurred and discretionary services like partnerships with police, fire and ambulance are going to be affected as they simply can’t afford the staff or the resources to deliver them.
If there’s not enough money, will local authorities be able to raid the finances and take money previously allocated for police and fire? Pete explains about the financial arrangements and how blocks of money for police and fire co-exist alongside local authorities. In the past the local authority could have spent money allocated for fire in other areas but where it is ring fenced this isn’t an option. This means that police and fire are in the same position financially as their local authority partners and could of course issue s114 notices themselves, although none have done this so far.
Squeezing non-statutory services is an inevitable response to decreasing budgets and Stuart explains that youth justice services, libraries, community centres and others have been cut disproportionately. To an extent they are easy targets but as he explains, it simply moves the problem and the impact elsewhere.
“Generally speaking, when you remove preventative services you increase demand for acute services down the road.”
Pete offered the example of Sir Peter Fahy, former Chief Constable of Greater Manchester Police who used to encourage local authorities to invest in preventative services.
“He saw local authorities as the frontline. He saw the impact of prevention in the community.”
Pete added a second example of recidivism rates for offenders, where the rates have increased because the preventative services have been reduced or even removed. He also highlighted the dearth of housing and social services to help resettlement of ex offenders back into communities.
Reducing inequalties
Emergency services have long been part of statutory arrangements called Crime and Disorder Reduction Partnerships or Community Safety Partnerships. Pete says that ‘if you follow the money’ it is clear that the government did not put money into preventative services. “The need for the these arrangements has gone up and not down,” he adds.
A more recent statutory development that brings local partners together is the creation of the Integrated Care System set out in the Health and Social Care Act 2022. It provides a new way for health and local authorities to work together to reduce health inequalities.
Stuart says that even though the system relatively is new, ICSs have already seen their budgets cut. He spoke about the pandemic where there was a massive focus on discharging people from hospital and changes to the way that was financed.
“There is a tension between the two: NHS hospitals want to see patients moved out into community settings but local authorities have to have the funding available to provide those services.”
There is a supply and demand problem at the heart of this. “There is always a lot of wrangling at the point of discharge from hospital,” he says. Removing the financial constraints made working arrangements better between the two organisations “In the end, it all comes down to resources and the ability to be able to absorb the demands of people in need without it triggering a crisis in your budget.”
There is, says Stuart, an imbalance in the nature of the relationship in the ICS where the NHS budget for all its services is an order of magnitude greater than the budgets held by local authorities for adult social care.
Discharge from hospital is a problem that is compounded by handover delays at the point of entry into the healthcare system. This is well described by Isabel Lawicka from NHS Providers in her interview last year with Emergency Services Times. But Pete’s focus turns to the problem of housing and homelessness – where do people go when they need more support and do not find it? He says, “The notion of integrating funds and integrating decisions is one where the theory is good but the practice is very different.”
How to pay for it all
If the gap between the demand for services and the budget available to pay for them continues to widen, what are the options for local authorities? Selling valuable assets like desirable city centre buildings is one option.
“Funding day to day spending with capital assets can only happen once but the financial pressures are ongoing.”
Stuart makes the interesting point that the value of local authority assets is more than the price tag. The social value to communities is measured in non-monetary ways and the benefits it brings. “It’s a myopic view” he concludes. Selling from a position of weakness also means that local authorities won’t get the best price and, in an election year, it could just be a cynical way to mask the long term financial problem. This is well described in a recent blog post from Sean Benstead at the LSE.
Council tax is an obvious place to look to raise money. Pete says that the cap for local authorities has risen to 5 per cent in recent times but historically has been lower.
“Council tax is regressive and the more you raise it, the more regressive it gets.”
He adds that while there might be short term benefits to increasing council tax, the reality is that local authorities need a fit for purpose local government finance system, as the select committee has suggested in its report. One option could be to embrace income tax as a way to fund local services instead, but that’s unlikely to be popular with politicians in the run up to an election.
Asked to give advice on what conversations emergency services should be having with their leaders about the consequences of financial distress in local authorities, Stuart said these must focus on impact and risk to understand how decisions made today will affect the blue lights further down the road. Pete adds that the conversation should be with the government about the existential problem inequality. “Reductions in inequality will benefit all parts of the population.”
This is a summary of the discussion from the 15 February 2024 webinar, When the money runs out: Why emergency services should be concerned about local authority insolvency. This is available to view on catch up.
