Financial resilience of English local government in the aftermath of COVID-19

Abstract

PurposeThe financial resilience of local authorities has been a serious concern over the past decade due to austerity and its effects on local government budgets despite rising service demands. More recently, the scale and suddenness of the shock from COVID-19 has exacerbated problems of financial resilience. This paper explores the financial management responses required by a sudden, nationwide pandemic of such severity.Design/methodology/approachThis paper applies the concept of financial resilience to English local government to analyse their situation in the aftermath of COVID-19. It is based on a close reading of official reports and the news media.FindingsLocal authority’s financial resilience could deal with normal levels of risk arising from austerity. However, the seriousness of COVID-19 alongside pressures still emanating from Brexit requires a significant level of central government support. This is critical as local government is expected to underpin future economic growth of the UK as well as deliver an important social response. Presently, the financial framework for funding individual local authorities through central government in terms of COVID-19 support is not on a reliable footing to answer specific demands. This can lead to gaming and perverse incentives.Originality/valueThis is the first paper to connect the financial resilience in the local government framework with the required central government funding procedures for sudden nationwide crises, such as the COVID-19 pandemic. It identifies the need to define what effect key variables, such as local government financial reserves, local deprivation indices and anticipatory financial management practices in local government should have on the determination of central government aid for individual local authorities.

Municipal financial vulnerability in pandemic crises: a framework for analysis

“…debt financing, reserves) sources, turning out to be at the interface between the environment and the organization". This perspective emphasizes objective sources of financial vulnerability, which include typical financial elements such as the level of diversification of revenues (Mikesell, 2013), the capacity to sell capital assets (Berne and Schramm, 1986), the availability of cash and financial reserves (Downing, 1991;Jacob and Hendrick, 2012), the level of expenditure rigidity, the connected idea of cost stickiness (Cohen et al, 2017) and non-discretionary expenditures (Maher et al, 2020), the capacity to incur short-term liabilities (Berne and Schramm, 1986), and the debt burden (Capeci, 1994) or any moratorium on debt repayment (Barbera et al, 2017) and changes in the cash flow on debt covenants (Ahrens and Ferry, 2020). The literature also suggests elements that could limit financial vulnerability when facing a crisis: Ahrens and Ferry (2020) mention an insurance for low-probability high-impact events; Barbera et al (2017) provide evidence about an anticipated approval for supplementary budgets, while Hochrainer (2006) talks generally about provisions for contingent credit.…”

“…In other words, it is the sense of being able to control financial vulnerability or influence its sources that affects the way in which shocks are interpreted and subsequently tackled, so much that perceived vulnerabilities play a central role in the anticipatory capacity to face shocks which is, in turn, essential for the implementation of bouncing forward capacities (Barbera et al, 2019). Yet, available information has proved to be highly insufficient to help appreciate the level of financial vulnerability, let alone putting in place effective coping capacities during a crisis (Ahrens and Ferry, 2020).…”

“…From the literature overview it further emerges that in the contingent and dynamic appreciation of a global, fast-spreading crisis (Ahrens and Ferry, 2020), the sources of financial vulnerability in each field of enquiry can be grouped into two types: lack of anticipatory capacity and lack of coping capacity (Barbera et al, 2017(Barbera et al, , 2019(Barbera et al, , 2020. Anticipatory capacities refer to tools and capabilities that are built up before a crisis arises to enable municipalities "to better identify and manage their vulnerabilities and recognize potential financial shocks" (Barbera et al, 2017, p. 675).…”

Managing expectations with emotional accountability: making City Hospitals accountable during the COVID-19 pandemic in Turkey

“…The provision of healthcare infrastructure via PPP hospitals has comprised a central theme in public debates in Turkey, the significance of which is re-emphasized by the outbreak of the global COVID-19 viral pandemic. Concerning the consequences of pandemic on public sector, connections have been made to neoliberal agenda brought by new public management reforms in different settings (Andrew et al, 2020;Ahrens and Ferry, 2020;Seiwald and Polzer, 2020). Such neoliberal agenda lies behind the PPP investments in healthcare sector, which has become the center of public attention by COVID-19 pandemic.…”

Accountability in times of exception: an exploratory study of account-giving practices during the early stages of the COVID-19 pandemic in Italy

“…The speed of the pandemic's global spread has led many national governments to declare a state of emergency both to allow them to Accountability in times of exception thoroughly understand the situation and to protect the people. As the disease continued to spread, this state of emergency was characterized by the adoption of various measures, including the limitation of individual freedom, the diversion of goods and services, the closure of public and private facilities and the use of mass-surveillance technologies (Ahrens and Ferry, 2020;Andrew et al, 2020;De Villiers et al, 2020;Nemec and Spa cek, 2020). While they differ in terms of their implementation, these measures are exceptional within most governments' legal frameworks (Nay, 2020).…”