Local Government Review: Does it all add up?

For richer or poorer? Kent's budget unknown unknowns

A shake-up of local councils that will end Kent’s historic two-tier system of providing services could lead to councils signing off plans that would leave them facing multi-million pound debts.

The government has ordered all authorities to come up with alternative plans to run and provide services through unitary councils, saying the two-tier system - made up of district and county councils - needs reform.

But an analysis of how re-organisation could work suggests that under some options, councils in Kent have little or no money to fund the change and the costs of transition.

According to a 240-page document on the transition costs, some options could damage councils and create further funding pressures for them.

The report has been drafted as a contribution to the debate on how the county should now be run.

Several councils say it could be years before they are in a position to pay the bill. But others could see extra funding. Transition costs could be for redundancies, changes in offices and consultants’ fees.

For the option of dividing the county into three unitary authorities, the report says there could be “moderate net recurring benefit of £9.3m” - before transition costs are applied, with it taking eight years to pay back the set-up costs.

And it could see a fillip for services for the elderly and young children - with an estimated increase in annual spend on children’s and adults’ social care and SEND across Kent and Medway of £14.9m.

The sum excludes any demand pressures that would also be added over time.

For other options, the outcome of reform is mixed. A split into four unitaries would see a loss of income, identifying a figure of £5.4m. According to the report:

“There is no predicted payback period as recurring costs continue to exceed benefits. New unitaries tax and / or reductions in service delivery.”

But there are more positive predictions. On the proposal that Kent could become a single unitary, there could be “high net recurring benefit of £49.4m (before transition costs).” Saving in spend on children’s and adults’ social care and SEND across Kent and Medway could be in the region of £16.2m per year.

One of the great imponderables about the prospect of splitting the county into unitary authorities is exactly what it would mean for council tax bills.

Given the successive increases that all councils have imposed in recent years in the tax it is no surprise that it is one of the key issues in determining what arrangement there should be in terms of the number of unitary authorities.

There is an incredible amount of detail in the 242 pages devoted to analyzing the options councils will have when eventually the decision comes. Unfortunately not a great deal of the content answers the key question council taxpayers can be expected to ask: how will this re-organisation affect our bills?

To which the answer is, no-one really knows.

There is a reason for this: it will of course be up to the new unitary authorities and indeed any form of elected mayor to determine council tax levels.

The report does allude to the challenges of dealing with new authorities which could contain areas of social disadvantage alongside more prosperous communities. It foreshadows a situation that is both frustrating and lacks clarity, suggesting we’d better hang fire until the smoke has cleared.

As the report sets out, it will be for the new unitary councils to make policy, that includes council tax rates.

There are some tantalising hints as to what might be on your council tax bill in the forthcoming two years but don’t be too surprised if the political outlook is as changeable as the weather.

As the report concludes on a rather gloomy note: “It is impossible to predict future policy decisions. The new unitary councils that would be created through LGR (Local Government Review) will make policy decisions and design their operating models as they see fit. This will have an impact on the outcomes of LGR that cannot be predicted.”

ANALYSIS

Bills, budgets and banks and the brave new world of local government finance…how it could look for councils:

The county council report exams in detail the potential impact of new council structures on the local government map of Kent. But it limits itself to general conclusions and options, applying each against different criteria to give each a point score under what it terms an “options appraisal”

It is distinctly wary on the financial ramifications, limiting itself to general conclusions and avoiding anything but broad findings - usually on the numbers of council taxpayers who might be better off and the number who could see bills increase.

On the options to split Kent into four unitaries, it states they would be the “least financially viable and deliver lowest efficiency. In this option, 57% of residents could face higher Council Tax.”

There is a similarly cautious assessment of another option to split into four saying there would be “no net benefit, high transition costs and no payback period. This option would also create an inequitable distribution of debt across the unitaries.”

There are mixed messages on council tax bills, with an assessment of a single tier arrangement forecasting it “would have the highest proportion of residents paying higher council tax, at 65%.”

The report flags up the contrasting financial challenges facing councils grouped together, with the level of debts lowest in more affluent areas such as west Kent and highest in those less well off, such as Medway.

Perhaps the best that can be said is that it is only when the historic split does occur that we will be able to judge the success or otherwise of the review.

Until then, we will have to abide by the words of former secretary of state Donald Rumsfeld who asserted that there are “unknown unknowns” - the things we don’t know we don’t know.”