Has local government funding gone to pot?

More and more, councils are being encouraged to bid for various pots of cash but is this the best way to deal with issues like the environment.

There has always been much more to local government finance than just council tax and business rates bills. It is a strange, murky world full of acronyms and titles that can leave most ordinary people baffled and bemused, despite the fact it has a direct impact on each of our lives.

It used to be a relatively simple affair. Councils collected council tax and business rates and handed them to the Treasury, who calculated how much money each local authority needed and gave them a lump sum in the shape of the Revenue Support Grant.

Other Whitehall departments would also join in and give local authorities money for specific tasks or purposes. But, if like Air Quality News, you spend your days writing about such matters then you have may found yourself seeing the phrase ‘councils are invited to bid for’ appear more and more in ministerial statements.

This is because the way central government funds local government has gone through a series of subtle, and not-so-subtle changes in the last decade. The Institute for Government calculates that Whitehall grants to councils — including retained business rates — were cut by 38% in real-terms between 2009/10 and 2018/19, from £34.6bn to £24.8bn in cash terms.

Increasingly, central government is turning to dedicated funding pots, like the Levelling Up Fund, Air Quality Grant funding and the Green Jobs Challenge Fund.

Obviously, no local authority is ever going to turn down extra funding, especially when it is targeted, but is running a bidding process really the right way to tackle long-term issues like pollution? And does this mark a shift in the relationship between local and central government?

‘This administration is turning local government into continuous episodes of Play Your Cards Right,’ says the executive director of the Institute of Economic Development, Nigel Wilcock.

‘And there is no acknowledgement of the disruption this approach causes in staff time writing bids and the impossibility it causes for budgeting. It is turning local government into a farcical position.’

One of the most recent examples was the announcement last month by the Department for Transport of a multimillion-pound scheme to enable local transport authorities to roll out zero-emission buses.
Up to £120m is being made available through the Zero Emission Buses Regional Area (ZEBRA) scheme, which will allow local transport authorities to bid for funding to purchase zero-emission buses, reduce the carbon emissions from their local public transport and improve air quality in towns and cities across England.

According to the government, the funding will deliver up to 500 zero-emission buses, supporting the government’s wider commitment to introduce 4,000 zero-emission buses.

The DfT has also recently urged English local authorities outside London to submit expressions of interest for a share of £15m of new funding to repair and upgrade their traffic signals and announced £18m for cycle training, which will be administered by the Bikeability Trust charity.

Philippa Borrowman, a policy adviser at Green Alliance says local authorities need to know the government is backing them to meet the goals set out in their climate emergencies.

‘All parts of the UK need to cut emissions, so funding pots requiring councils to bid for cash risk leaving some behind,’ Ms Borrowman tells Air Quality News.

‘The bidding applications can be time consuming without any guarantee of success, so under resourced councils may avoid applying altogether. But, long term, stable funding for local authorities is needed for councils to reduce emissions and support the government’s net zero targets. However, there is a role for top-up funding to achieve specific goals, like the chancellor’s Levelling Up fund. Widening their scope for example to invest in decarbonising transport or bolstering jobs in restoring our natural environment can help specific areas catch-up.’

Peter Jones, one of Eunomia’s consultants focusing on local environment, says small, competitively awarded funding streams can allow new ideas to be developed, trialled and reported on.

‘So long as the funding allows for proper evaluation of the results, letting a thousand flowers bloom will let us find out which are the most attractive,’ he explains.

‘There is certainly more to learn about ways we can address both air quality and climate change; however, we already know the biggest measures we need to take to reduce greenhouse gas and air quality emissions. We need massive programmes of insulation and electrification of heating.

‘Where programmes need to be rolled out very widely, using small, competitively awarded pots of money just adds to the transaction costs of putting the funding in place. An organised and systematic approach is required, that allows a prioritised roll-out across the country, based on what has been learned through earlier programmes and interventions,’ adds Mr Jones.

Of course, the pandemic has further clouded the already murky waters of how local authorities are financed. A recent study by the trade union Unison claimed councils in England and Wales are facing a financial deficit of almost £1.2bn, in part because of extra costs fighting coronavirus.

The trade union published figures, which show that in December top-tier councils predicted funding gaps totalling over £1bn by the end of the 2021 financial year. At the same time, district and borough councils projected a collective deficit of £179m due to increased spending and reduced income caused by the pandemic. And it warned these funding gaps will increase as the full impact of the pandemic is realised over the coming years.

All eyes will also be on how the continuing pandemic also affects the money central government is able to collect. Public sector finances are under tremendous strain at the moment. If the economy starts to bounce back, then the Treasury will have more cash to play with, although with borrowing still at record levels, there might not be much to go around.

Whatever happens to the nation’s finances over the next few years, it seems the era of pot funding is here to stay and councils will have to get used to playing their cards right. Higher, higher anyone?

This article first appeared in the Air Quality News magazine, click here to view.