It’s no secret that local government are navigating a difficult financial climate. Special Interest Group of Municipal Authorities (Sigoma) published in August 2023 that “Twenty-six local authorities could issue s114 notice in next two years”.
Demand far outweighs budgets, with arguably as much as two thirds being directed into social care and a disproportionate amount of funds being left to cover other essential services. The demand continues to increase for council services, yet costs by far exceed allocated income and funding.
Whilst there has always been a synonymous drive for cost saving in councils, some more robust solutions have been proposed, including in 2011 when the government pushed for councils to share back-office functions, or the setting up of commercial arms and LATCo’s. Whilst some have achieved outcomes, they have not been as successful as expected in achieving economies of scale and reducing duplication of effort, which hasn’t paid its dividends.
The levelling up fund aimed to do just that. However, it threw councils into competition with another, often needing to externally resource for professional bid writers and incurring additional cost. Moving forward, how can councils innovate to resolve the financial crisis and challenges?
Andrew Ireland, Director of Strategic Investments at a London based local authority shared just some of the ideas that Councils could consider:
Social Impact Bonds (SIBs): Collaborate with private investors and social service providers to implement Social Impact Bonds. Providing upfront funding for social programs, investors receive a return on their investment if specific social outcomes are achieved. This approach can help reduce homelessness, improve educational outcomes, lower reoffending rates, and more.
Community Land Trusts: Establish community land trusts to provide affordable housing solutions. Transfer land ownership to a trust, and then leases or sells properties at affordable rates to low-income residents. Councils can work with local communities and organisations to create and manage these trusts.
Revenue Diversification: Seek out alternative revenue streams, such as tourism promotion, cultural events, or property development. Councils can collaborate with local businesses and stakeholders to stimulate economic growth and generate additional income.
Green Finance and Local Energy Initiatives: Explore green finance options to fund environmental initiatives, such as renewable energy projects, energy-efficient infrastructure, or sustainable transportation. This can include issuing green bonds or seeking funding from organizations focused on environmental sustainability. Partner with local renewable energy companies to develop and manage renewable energy projects within council boundaries. These initiatives can generate revenue through energy sales, reduce carbon emissions, and promote sustainability.
Public-Private Partnerships (PPPs): Explore partnerships with private sector companies for infrastructure projects and public services. By leveraging private sector expertise and capital, councils can develop and maintain essential services, such as transportation, waste management, and energy infrastructure.
Municipal Banks: Explore creating local municipal banks to provide financial services to residents and support local economic development. These banks can offer affordable loans, savings accounts, and investment opportunities for council projects.
Andrew stated that these initiatives and partnerships can help Councils address financial challenges, improve service delivery, and promote sustainable economic growth within their communities.
However, the chosen approach should depend on the unique needs and resources of each Council. So, how do we equip local authorities to retain and develop talent, ensuring that they have the right skills to address current and future demand?
In our recent CIPFA Penna Talent Development Board with attendees from CIPFA and leading financial professionals, we discussed the increasing need for talent attraction into public sector finance. This included a recognition for more rigorous succession planning when considering future S151 and Finance leaders and diversity within this talent pool.
Furthermore, as we work with CIPFA to help future proof talent within the sector, how can we increase the appeal of public sector finance as a career path?
With the current state of the economy, and the expected impact on the private, it could create a perfect opportunity to attract private sector talent into local government roles. Could this talent group bring a different skillset or way of thinking that could steer services into being more commercial minded whilst remaining customer centric?
Whilst news surrounding this topic can often be doom and gloom, there is no doubting the passion, efforts and ‘miracles’ that have been demonstrated by council officers. We should also remember to celebrate council’s efforts to effectively deliver services despite the exponential and arguably unavoidable financial challenges they continually face.
That said, let‘s remember to promote the sector. We shouldn’t be shy to demonstrate some of the brilliant thing’s that councils deliver well. With the CIPFA Public Finance Awards just around the corner, we are reminded that we should talk more about what we’re proud of. I can’t wait to hear about all the positive and effective things that are to be celebrated this year.
Together, with commitment to a common goal, effective succession planning, talent development and better support from Government to fund and devolve innovative solutions along with some of the best talent, we can hope for a flourishing future within local government.
Karima Dakhama, Senior Consultant at CIPFA Penna, the specialist finance recruiter.