Guest blog by JP Spencer, Principal Consultant at Metro Dynamics.

Whether it is people or institutions - not knowing where your income is coming from, or how much, month to month or year to year creates a mentality focused on short term firefighting.

The overall capacity of local government has declined over recent decades through governments run by both major parties. With a General Election and Spending Review expected in 2024, there is an opportunity to reestablish the essential role of local government as deliverer of vital services, partner of local businesses and custodian of place.

The Centre for Progressive Policy and Metro Dynamics convened a roundtable discussion to address this topic – a detailed summary of which is available here.

Central government often has the right intentions but needs to create a new framework in which it steps back to give local government the space to deliver. Without such a framework, we get the chaotic funding landscape of present seen in the diagram below: Local Government Finance Settlements confirmed mere weeks in advance of the financial year; Spending Reviews taking place on an irregular basis; and, a myriad of grants and complexities for local leaders to navigate.

To change this, we propose a new Local Government Act that sets out the key responsibilities of local government, provides a new framework for multi-year funding based on three year settlements, creates a new independent body to make recommendations on the distribution of funding to local authorities, sets clear parameters (e.g. population, deprivation) for allocation of funding based on advice from the new body and consolidates grants as far as possible unless Parliamentary authority is given.

Greater certainty and autonomy for local government must also be reconciled with a constrained fiscal environment. A new Fiscal Responsibility Act should put fiscal events on a firmer statutory footing to provide greater certainty for local government and public services with Spending Reviews taking place every 2 years setting 3 years’ worth of budgets and Budgets (focusing on tax and macroeconomic stability e.g. inflation, output gap, inclusive growth) to take place annually with a requirement for an Office for Budget Responsibility forecast.

These ideas were based on four principles on the necessity of local government, a desire for funding stability and simplicity in order to deliver in return for accountability to those it serves.

This new system will not mitigate all the effects of recent – and potentially prospective - funding cuts, nor will it address the need for further consideration of social care funding as our society ages, but it will remove some of the key drivers of poor outcomes in the current system. This year’s announcements on single settlements in Trailblazer Devolution Deals and tentative steps on funding simplification are in the right direction, but do not meet the necessary scale of the challenge.

Local government is essential for economic development as well as prevention; creating better outcomes in areas from health to the wider economy. With such a system in place, local government would be able to plan with greater certainty for the long term – reducing the need for short term job cuts due to short term grant structures, improving services for users and enabling local business to invest for long term prosperity.

Spending Reviews processes and settlement lengths since 1998