The Local Zeitgeist of 2024

With over decade into austerity, Local Gov finances have been eroded to tipping point, and so we face many more years of fiscal restraint as we move into a new era of perm austerity. Meanwhile demand for our services is rising, partly as a result of the impact of austerity on some of our communities and partly because of the macro-economic reality we find ourselves in. All this is happening in the context of increasing demand and pressures on our National Health Service (NHS) and the implications this has on our communities and the services we provide. 

Now more than ever, Local Gov is facing significant on-going financial challenges and risks – doing nothing or to continue doing what we have done in the past is not an option, nor is doing less. We need to find our own ways to plan and then gear up for a future in which we can operate effectively, independently and do so within a reduced financial envelope.   

The pandemic has had a negative impact upon our finances and those of our partner organisations, creating significant pressures on Council’s medium-term financial plans. Because of this and other demand led and inflationary pressures, adopting a business as usual, ‘salami slicing’ approach to managing this gap, is unlikely to deliver the savings we need - nor will it enable us to address future challenges.

Furthermore, increased climate targets are driving up investment requirements for our businesses, infrastructure, Council owned assets and our housing stock.

A cost-of-living crisis, partly driven by inflationary pressures from the cost of energy and foods, supply chain disruption and the inescapable truth of excessive monetary quantitative easing (printing money), have led to exponential price increases across all sectors and which are most felt by our communities. We anticipate inflationary pressures and decreasing purchasing power to continue for the unforeseeable future.

For most of our residents this means further erosion of their disposable income, leading to higher household debt levels, eviction rates and debt owned to the Council. While current unemployment levels are at a historic low (nationally and locally), wages have not kept up with inflation. Unemployment is particularly stark amongst our young population (aged 18-24) and we expect this demographic group to struggle finding well paid employment as the economy falters and as their skill set and experience do not match future job opportunities. The risk for this group to fall into a life-long dependency spiral is now real.

2022 saw the start of the end of cheap money, with inflation and monetary policies driving up interest rates and with it the cost of borrowing (debt), creating uncertainty around economic growth and certainty of the UK economy moving into recession, alongside our trading partners. The impact on our cities and communities has yet to be evaluated as economic prosperity and growth will falter over the coming years. 

Funding pressures are only part of our problem. Nobody believes that ‘salami slicing’ will work - politicians, businesses, nor our residents. There are predominantly 4 areas of savings opportunities Local Gov has been pursuing to achieve financial sustainability:

1.  Reducing spend and get a better deal from those organisations we rely on to provide services including our supply chain - pushing too far will have a direct, negative impact on our local suppliers and local employment. 

2.  Transforming the way we deliver services, doing things differently in a way that improves outcomes and doing more for less or have somebody else doing it cheaper - this has worked for some of our services, but many local authorities are bringing back in-house service delivery where this has fallen short of their expectations.

3.  Capital receipts programmes have reduced the risk of future interest rates exposures and our cost of borrowing by selling some of our assets. While these savings have been vital, selling assets only yield one off savings to our bottom line and once those assets are sold off diminish our opportunity to benefit from future returns.

4.  Stopping ‘non vital’ services or charging more - this can only be done within the limits of consultation and our statutory obligations to those who need our help & support the most.

Our long-term financial resilience therefore rests on our ability to manage demand  - understanding and then tackling the root causes of service demand is therefore absolutely key.

COVID lock downs and policies have highlighted the importance of local government in building trust with our communities – but the pandemic has also highlighted the challenges government faces in building trust amongst our younger population and our (in)ability to influence information and decisions. The next financial crisis is likely to see a shift of power from institutional stakeholders to individuals facilitated by the shift to digital currencies and new regulations geared towards protecting individuals and their data.

We will need to find new ways of connecting and build trust with our younger residents and create an environment of healthy democratic participation through effective community engagement, enabling a stronger sense of belonging and purpose - and then a conversation about the role of the state. Making better use of data & insight to identify needs in our neighbourhoods and tap into their sentiment to continuously sense check why and what we do and whether we do it right will facilitate this change. This includes re-connecting and reaching out to our younger residents and using alternative methods of communication and new ways of bringing people closer to us – this is about Trust!

Government has also been implementing reforms in national policy and legislation and which continue to have a major impact on council services, residents and local businesses. They include reform of the housing and planning systems; welfare reform, including a reduction in the cap in household benefits and a freeze on working age benefits; reform of adult social care; children’s care and health and social care integration; promoting ‘devolution deals’ at regional levels; plans for schools to become academies; and changes to the way children with special education needs and disabilities (SEND) are identified and supported.

The combined impacts of austerity, population change and government policy means that we can no longer afford to meet the needs of our residents by spending more money on the kinds of services Local Gov provides. Instead, we need to re-focus what we do so that we can identify the root causes of needs and then tackle them - so that people have a better chance of living in their community more independently, and with better outcomes.

Future shocks will test our ability to respond with an already fragile social infrastructure and support system. The World has changed and so must we - People will change and organisations will change, regardless of whether it is planned or not.

‘Place’ has a new meaning, for our staff it is more hybrid, more integrated and for young people it has a different sentiment (online communities). While our structures have been resilient during crisis (because we had to), the old structures are often no longer fit for purpose to service future needs. 

A Sustainable Future Local Gov requires us to have an organisational structure that is build around needs, fixes the basics and delivers excellent customer services. This means looking at all aspects of not only what we do but how we do it, together with our partners. Essentially this is about:

1.  How we serve – delivering excellent services to our customers and partners at all opportunities, based on their needs rather than our structures.

2.  How we work - maximizing flexibility and minimum constraints to optimise performance in support of those who depend on what we do.

3.  How we enable - creating highly performing services including Workforce, Technology, Finance, Procurement, and key capability in data & insight.