Independent Commission on Local Government FinanceEamon Lally

CIPFA North West Annual Conference 14 November 2014

The Commission

Terms of Reference• Identify the strengths and weaknesses of

the local government finance system,

• Bring forward practical options for reform in the next Parliament and

• Develop and test those proposals against the key challenges facing the country – growth, housing supply, effective welfare provision, affordable health and social care, and early support to families and children.

Timetable from here: 30 Oct: interim report publishedNov-Dec: Engagement on Interim findingsFeb 2015: Final report

Context: National tax and spend

Context: The path of future revenue funding – not including schools

2010/11

2011/12

2012/13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

2019-20

-£10,000,000

£0

£10,000,000

£20,000,000

£30,000,000

£40,000,000

£50,000,000

£60,000,000

Additional Social Care fundingChange in reservesInvestment incomePublic Health allocationOther grantsFormula GrantRSGRetained Business RatesCouncil tax

£bill

ion

The localisation of council tax support in April 2013 re-duced the taxbase

• Total funding projected to fall to £43.4 billion by 2019/20

• This includes £3.1 billion of Public Health funding which carries with it a new responsibility

• All figures are in cash terms

• In 2013/14, 38% of total funding is from council tax, 19% from retained business rates, and 28% from RSG

Negative reserves figures when councils underspend and contribute to reserves

Public health funding not new money as it comes with a new burden

4Source: LGA's Future Funding Outlook 2014 - outturn data to 2012/13, budget data 2013/14. 2014/15 and 2015/16 based on settlement, 2016/17-2019/20 from LGA projections

The Commission’s vision

The local government finance system should:

• Promote self-reliance and self-sufficiency• Encourage entrepreneurialism and innovation• Promote local decision-making on service

delivery• Transparency• Maintain support for the most vulnerable

What the Commission has said it agrees with

• Self-sufficiency• Greater freedom over council tax, including

bands, rate, and discounts• 100 per cent retention of business rates• Devolution of skills and welfare to work

funding• More integration of decision-making across

local public services

6

Pace and Scope of Change?

• Variable speed reform?• Self-sufficiency over all local public services?• New incentives?• A new approach to equalisation?• Integrated services?• Bold approaches to housing supply problems?

Self-sufficiency?

Self-sufficiency at a sub-national level

Equalisation

• Not all Councils can grow economically at the same pace

• Not all Councils will grow their populations at the same pace

• Councils will face different Levels of demand

Challenges and questions

• What is the appetite for radical change?• Is there evidence that integrating health and

social care services will create savings? • What incentives are needed if any?• What should the balance be between

incentives and equalisation in the system as it moves towards self-sufficiency?

• How would it work – the wiring diagram?

Independent Commission on Local government Financeenquiries@localfinancecommission.orgContact Eamon Lally: Tel: 07799768570