The costs of housing benefit for families in B&Bs and other temporary accommodation is so high that it in some parts of the capital it would be cheaper to build new social housing for them. As councils pay for private rents at market level, the rent for each household in social housing would be much cheaper.

As ministers prepare to cap the amount of housing benefit families can receive – potentially leaving 64,000 people who currently reside in London unable to afford to continue living there – NLGN calls for the government to examine new house building as a partial alternative.

The report argues that this will be less disruptive to peoples’ lives while also meeting the government’s aim of building more properties and providing a short term fillip for the capital’s economy. This new housing could be built using a combination of housing benefit set at social rent and block grant from the Department for Work and Pensions to repay the development costs. Alongside the cashable long term savings, the capital’s housing supply would be increased by 9500 units.

Simon Parker, Director of the New Local Government Network, stated:

“We recognise the need to contain housing benefit costs, but the idea of building new homes represents a win-win solution for the government, councils and families. Our analysis suggests that 10 boroughs might be able to save money while providing more properties.

With a predicted shortfall of 750,000 homes in London by 2025, there has never been a more vital time to pursue this approach.”

The collection is an uncompromising analysis of where the District Councils’ are currently and crafts a vision for where they need to go. Contributors included, Manjeet Gill, Chief Executive of West Lindsey District Council, Ruth Marlow, Managing Director at Mansfield District Council and Sandra Whiles, Chief Executive of Blaby District Council.

Working together with the District Councils Network we hope this collection is the start of a much broader conversation about the future of District Councils.

Local government used to be able to borrow cheaply from the Public Works Loan Board, but a recent increase in PWLB rates means that it could now be more cost effective for councils to issue their own bonds. The recent GLA bond issue suggests that, in the right market conditions, this financing option could save councils up to 20 basis points on their borrowing costs, amounting to millions of pounds on a large bond issue.

Against the backdrop of a 22% cut in central government funding for local infrastructure, the research shows that an astonishing 84% of councils surveyed face a capital funding shortfall. This translates into crumbling schools, potholed roads and slower economic growth for many parts of the country.

Nearly two thirds of the councils surveyed for the new research say the PWLB rate rise will change the way they borrow, suggesting that bond issuances will come back onto the local agenda for the first time in 17 years.

Capital Futures was supported by a Taskforce made up of experts from across the local government finance sector.

Report author and Taskforce member Tom Symons said:

“Councils must explore a completely new landscape of financing options to survive this Spending Review. Issuing bonds on the capital markets could enable vital investments to be saved, assuming the right market conditions. As a result of central government cuts we need to see a much more ambitious approach from the sector if our infrastructure deficit is to be addressed”

Chair of the Taskforce Paul Woods (and Finance Director at Newcastle City Council), said:

“The responsibility for driving economic growth and responding to the demands of communities in an uncertain and difficult climate has fallen largely on councils. Councils have a vital role to play, and it is important that as a sector we optimistically grasp this time as a moment of opportunity.”

The report warns that without these reforms, social care in England risks ending up in the same situation as the Netherlands, where cost inflation and austerity measures have led to the scaling back of the Dutch equivalent of personal budgets.

The think tank’s new analysis of council cost data shows that each additional direct payment issued to someone with a learning disability, between 2002-10 adds between £15-25,000 to a council’s overall expenditure on learning disability services. This may reflect the fact that personal budgets are identifying new and previously unmet needs, and it is possible that the new system will save money for other sectors such as the NHS. The finding should nonetheless ring alarm bells in Whitehall about the pace of change.

This means embedding new measures such as “Social Care Related Quality of Life” (SCRQoL) that assess the quality and impact of social care services. If councils are better able to manage the contribution a service makes to a person’s wellbeing, and use that information to create a vibrant, competitive market that delivers best value for money. With a robust outcomes measurement system in place, emerging commissioning tools such as payment by results and social impact bonds could be developed within social care.

To reconcile the shift in relationships that outcome-based commissioning implies, commissioners will need to play a greater role in developing the market and “place shaping”. This will ensure that people with learning disabilities have a real choice between a wide range of services, so that people are able to access wider public services including employment and leisure as well as residential services and day services.

Report author, Daria Kuznetsova said: “We need to make a decisive shift away from managing outputs and instead develop new metrics and commissioning approaches based on outcomes. This will drive a focus on value for money, rather than simply cost, and it will help commissioners identify effective forms of intervention that help people with learning disabilities to live the lives they want to lead.”

Care for people with learning disabilities accounts for more than 23% of the adult social care budget, and represents the fastest growing part of that budget in last five years.

The report was launched following the coalition’s planned introduction of a package of decentralist policies to designed rebalance local-decision making in favour of economic development. The Local Government Resource Review will allow local authorities to retain increases in business rates generated in their area. This represents a fundamental change in the way local government in England is financed. The report makes recommendations to ensure this business rates retention model achieves goals and reinforces a council’s ability to secure economic growth.

The report is guided by two principles.

• Firstly, if the government is going to move to a system designed to incentivise business growth, then the system must be geared towards this goal. A change in the system should not become a complex replication of the current grant settlement.

• Secondly, whilst we believe that a system of redistribution and equalisation is essential, we argue that it must operate outside the business rates retention scheme. We call specifically for a capital fund to be accessible by areas of lower business rates growth.

Localism think tank NLGN today welcomed the principle of allowing councils to keep more of their local business rate growth, but warned that the government’s current proposals could create an overly complex system of tariffs and transfers while allowing the Treasury to siphon off a chunk of business rate money.

In its response to the government’s consultation on plans for business rate retention, NLGN highlights evidence that giving councils an incentive for growth could help boost the UK’s lacklustre economic performance. But this can only be achieved if ministers prioritise the growth incentive over concerns about fairness – too much complex redistribution will make the incentive ineffective. In practice, the think tank argues that councils should be allowed to retain up to 70% of business rate growth.

To address legitimate concerns that some councils will lose out, NLGN recommends that the government should use part of the proposed levy, set-aside and safety net funding to pay for lump sum transfers to areas with less potential for growth, as well creating a capital fund to support public investment in lower growth areas.

The think tank also expressed strong concerns about government plans to top slice billions of pounds of business rate growth to help pay down the deficit over the next two years, and possibly beyond. The business rate is legally a local tax, and ministers must provide clear principles and reassurances about how any top sliced rates money will be returned to local government.

Director Simon Parker said: “These reforms represent a significant step towards giving local government more financial independence, but only if they provide a clear incentive for growth that is uncluttered by complex redistribution mechanisms. Councils will not respond to the growth incentive if they are uncertain of what will happen to any extra money, and the Treasury must be clear from the start about how it will use any top slice. While fairness and need must remain core concerns for any local government finance system, the worst possible outcome of this reform would be a muddled system which produces no real change.”

In its response to the consultation, NLGN proposes an alternative levy design based on the combination of a flat rate marginal tax and a lump sum transfer linked to the baseline. Such a system would connect the collection of funds through the levy with the mechanism through which those funds are redistributed. Both are intentioned to equalise impact of business rate growth on local authorities with different baselines.

1. A PDF copy of NLGN’s response to the proposals is available here

As citizen demands change and cuts start to bite, NLGN’s research shows that, while the average cost of borrowing a book is around £3.50, in some areas it can be as high as £8.00, largely due to a 13m decline in the number of issues since 2005/6. While this figure does not capture the full value of all the services a library provides – such as free magazines, community space and internet use – it does highlight important changes in the ways people use these community facilities.

NLGN argues that the best way to democratise book access in future will be to make a radical shift to e-readers, online ordering and book vending machines in public places. This would make it much easier for the public to access books while freeing up library space for use by families and communities. Libraries would still hold the most popular titles and children’s books and act as a crucial community hub.

The new report, Transforming Universal Services, supported by May Gurney, also sets out the case for major reform of transport and environmental services beyond the next election. Proposals include:

• The increased use of congestion charging and adoption of road user pricing by central government
  
• City-wide cap and trade schemes for business waste using new variable charging technology, with any profit being used to reduce the business rate
  
• New green bonds allowing local people and businesses to invest in energy from waste plants and to receive a dividend from their operation

NLGN researcher Daria Kuznetsova said:

“We need a radical discussion about how public services need to change over the coming decade. Our proposals envisage a world in which citizens and businesses get far more choice about how they use and access key services. We envisage libraries that are accessible online and through vending machines in train stations. We call for businesses to refurbish old furniture and computers to avoid landfill taxes. And where citizens and businesses can help local authorities make savings, they should get a share back through council tax or business rate discounts.”

The publication, entitled The Next Question: The future of local leadership, includes a cross party collection of local government leaders who each contribute their thoughts on what the key challenges for council leaders will be in the future.

Head of External Affairs at NLGN and editor of the publication, Liam Scott-Smith, said that:

“The Government is right to acknowledge the crucial role played by council leaders in delivering on the localism agenda. To ensure that leaders can continue to play an important role Whitehall needs to make an extra effort to engage with them.

With local government going through a period of unprecedented change we need to open a discussion about what the future role of the council leader, and by extension all local councillors, will look like.”

Contributions to the collection come from Cllr Mike Whitby, Leader of Birmingham City Council; Cllr Simon Henig, Leader of Durham County Council; Cllr Claire Kober, Leader of the London Borough of Haringey and Cllr Jeff Reid, Leader of Northumberland Council.

One scenario outlined in the ‘Future Councils’ report suggests that a lack of funding and new rights for citizens over planning and service delivery could by 2020 leave local authorities in the same kind of position as the Californian state government: struggling to provide services in the face of high demands, low income and increased direct democracy.

Drawing on an analysis of anticipated and emerging trends across the sector and in national politics, the report predicts that councils of the future will take on substantially less direct responsibility for service delivery. In particular the report suggests there will be an increasing emphasis on commissioning services and more devolution of power to neighbourhoods and individuals.

NLGN Director and report author Simon Parker, said:

“Local authorities are quietly preparing to transform the way they work in response to budget cuts. Some services will change radically as councils become commissioning hubs. Expect councils to redesign everything from social care to street cleaning, more delivery by the private and voluntary sectors, and an increased reliance on personal budgets.

“This is a time of risk and possibility for local government. Town halls could find themselves becoming less relevant as direct democracy and consumer-led services start to bypass local democracy. The key for councils who want to remain at the heart of their communities is not just good service delivery, but strong political leadership to drive economic and social growth for their residents.”

In a foreword to the report, Northumberland County Council Chief Executive Steve Stewart said:

“The scenario-based approach taken here is essential. It’s not just the preserve of think tanks and academics. It’s essential for practitioners, especially over the next few years if we are to sustain any kind of economic and social resilience in our places. None of these scenarios might actually materialise, but is likely that elements of all of them could.”

Based on a scenario planning exercise involving senior figures from local government and an analysis of existing council plans for change, ‘Future Councils’ highlights a number of ways town halls could be transformed over the next eight years to 2020 as the cuts bite. These include:

1. Councils in areas such as the north east clustering together into new regional federations to manage economic growth and share their services – with some having Boris Johnson-style ‘metro mayors’

2. Councils introducing ‘pay as you go’ public services for residents and selling their services to neighbouring boroughs, allowing them to cut council tax and perhaps even pay dividends to poorer residents

3. A handful of local authorities that try to commission most of their services might become ‘residual councils’ – a commissioning hub that directly delivers almost no public services.

Following the publication of today’s Treasury Select Committee report on PFI, Senior Researcher Tom Symons of localism think tank the New Local Government Network (NLGN) said:

“This inquiry offers a damning critique of PFI but few recommendations for lasting change. It’s been clear for a number of years that PFI has a number of benefits, but isn’t always the optimal financing route.”

“The solution is a more level and diversified playing field of finance options, with councils able to select the method that best suits their needs. Ongoing NLGN research is currently looking to set out a range of choices for local authorities, including PFI, bond issues, LABVs and Tax Increment Financing”

Ends