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12th March 2021

6 medium term challenges for Local Government in the East of England

The East of England is a highly varied region; from tourist hotspots with ageing, rural populations to commuter settlements on the periphery of London, the region faces a variety of challenges and opportunities. Solace business partner Grant Thornton  UK LLP hosted a virtual workshop with Chief Executives and senior officers representing authorities from across the region to discuss financial sustainability in increasingly uncertain times, supported by Grant Thornton and CIPFA’s Financial Foresight tool. Claire Hampson sets out the key themes generated by the discussion:

  1. Avenues for income generation

With reducing financial settlements from central government, councils have increasingly looked to income generation as a means of funding and supporting delivery of key services to local residents. This is typically done through fees and charges (e.g. parking) or investments in commercial property to generate revenue income (e.g.  shopping centres). But the pandemic has caused many of these income sources to become less certain, and the November 2020 PWLB change has significantly impacted councils’ ability to invest in property for yield. There is concern that the traditional methods of income generation may no longer be reliable, and councils will need to focus on efficiencies and further cost reduction to address budget gaps in the short to medium term while at the same time managing risk.

  1. Changing behaviours and lifestyles of residents

COVID-19 and associated lockdown measures have had a fundamental impact on how we live our lives, how and where we work and how we use our local amenities. For local government this will have a significant impact on both how they deliver services and on what residents expect.

In terms of how local government deliver services, councils are increasingly looking towards digital solutions which should support financial sustainability and driving of efficiencies in the long term. However, in the short term this will require significant investment, as well as a review of the capability of the workforce to deliver. Meanwhile, as unemployment increases and home working drives an exurban migration beyond the traditional commuter belt, councils could find the characteristics of their area shifting rapidly (albeit with significant intra-regional variation).

  1. Base funding for local government

Challenges to local government financial sustainability remain, with single year settlements continuing to hamper the ability to plan over the medium term. Many authorities are also not planning to make full use of their expanded tax-raising powers with some not making any increases for 2021/22, despite budget gaps. This is often due to differing local political priorities with some areas reluctant to place additional pressures on family finances, whilst others are calling for a removal of the cap on council tax rises to allow them to raise further income.

  1. System relationships

Relationships and networks across systems present both an opportunity and challenge for local government in the context of financial sustainability. In times of constraint, financial challenges and pressures can be pushed to adjacent tiers of government; from central to local and from county to district, as well as parish and town councils. It will be important that such interdependencies are understood when taking financial decisions.

  1. Local government role as provider of last resort

We often consider local government as a ‘provider of last resort’ in the context of care, but this is also the case for other services such as leisure. The leisure sector has been rendered unsustainable during the pandemic and this is having a significant impact on finances in the short term. Many councils are currently subsidising external providers or have brought services back in house to protect local workforces. However, with a more medium-term view, it also poses significant questions about the future of leisure services, the model in which they should be provided and the additional benefits that would not be delivered by a private provider. In more rural areas, private provision of leisure services is rarely an option so local government provision is critical for the promotion of wellbeing in these communities.

  1. Workforce engagement

The local government workforce is experiencing a high level of fatigue. Even pre-pandemic many council officers had ‘savings fatigue’ due to the year on year need to identify significant levels of savings and a constant demand for transformation as a result of austerity. With the additional effort of the pandemic response and heightened concerns about financial sustainability, the workforce has never been more drained and isolated during lockdowns, and this is a significant challenge for leaders in local government. Furthermore, agile and home-based working (though it has many benefits) does present challenges for local government leaders in terms of engagement and cohesion, ensuring that working does not become siloed and keeping the connection with the local area that officers serve.