Dan Humphries, Associate Director
As the new year dawns it’s an appropriate time to scan ahead and look at the outlook for local government in 2022.
Over the past two years the local government family has excelled like never before. When the pandemic and resultant lockdowns hit our communities, councils the length and breadth of the country didn’t just keep providing the vital services that keep society ticking along but went above and beyond. They set up community hubs, distributed food parcels, disbursed business support grants and provided a wealth of other support to those who needed it. This was all achieved against the backdrop of unprecedented funding pressures that councils had been dealing with.
As we enter 2022 we do so with confidence that local government is able to deal with huge challenges, but a number of question marks about what the year holds.
The first uncertainty is, again, what Covid holds in store for us. The Omicron variant is more transmissible and more able to evade the current crop of vaccines but the evidence so far is that it is milder than previous variants. The increased case numbers nonetheless mean that, for now at least, parts of the NHS are being overwhelmed and that there are high levels of staff absences across our workforces.
It would take a crystal ball to tell us when those pressures will ease but in time they will. What follows will be crucial for councils. The Covid funding from the government in its different forms is coming to end. The income guarantee scheme, the Contain Outbreak Management Fund and other funding streams were temporary and they either have already or will soon start to fall away. Time will tell what the lasting impacts of the pandemic will be on our communities, businesses and councils. What we do know is that the increased levels of support that councils have had to provide won’t be able to be turned off like a tap. The demands on councils will remain high.
The good news is that core funding from the government is creeping back up with a 4% increase for 2022/23. Added to this many councils used the last decade to rationalise back office services, invest in their digital capabilities and build their portfolios of revenue generating services and assets. Those strategic moves will stand those councils in good stead but the financial headwinds are still blowing.
On the demand side the pressures on social care, childrens’ services and housing will all continue to grow in the short to medium term and inflationary pressures on energy bills and pay settlements will be likely to wipe out the extra 4% of funding. On the income side Council Tax can only go up by 3% and revenue from car parking and other discretionary activities is likely to be depressed for some time yet. Added to this warnings have recently been issued about local government pension funds. In recent years these have tended to be in surplus providing temporary relief for council budgets but fluctuations in the stock markets could all too easily create pension deficits that will have to be plugged.
Aside from the existing pressures facing councils 2022 will see the long awaited, and now overdue, publication of the Levelling Up white paper. There ought to be plenty of opportunities for councils in there but we’ll have to wait and see to find out what is being asked of councils in return. So far devolution deals have required some form of new governance arrangements – in most instances the creation of a new Mayoral system. This has proven to be one step too far for many areas so if the Levelling Up process is to be a collaborative effort in those areas the Government will have to come up with a new arrangement or be prepared to offer much more in the way of incentives.
2022 will be defined by Covid as 2020 and 2021 were. The question is how much Covid will define the year and whether councils will be able to keep funding their efforts and play a role in Levelling Up the country as well as leading our communities through the new normal.