Grasping the nettle: the central–local constraints on local government funding in England

Abstract

In England, the traditional method of central government redistribution and equalization between locations has been replaced with a greater emphasis on self-sufficiency and entrepreneurism. English local government now faces existential funding questionsa situation that is repeated around the world as the public sector manages the fallout from the Covid-19 pandemic. Financialization has figured large in the study of entrepreneurial behaviour. However, in England, legal and procedural constraints have driven authorities to seek revenue funding from other sources, principally seeking additional property-related revenues. In response, this article presents a novel typology of local government funding sources and offers an original analysis of their implications for local authorities' role. The empirical findings show that the buoyancy and quantum of many funding sources are constrained by prior evolution of location and centrallocal relations: they are not automatic routes to financialization. Conceptually, these findings reveal that methods of financialization, and the local government funding system within which they typically sit, are as likely to be constrained by the evolution and techniques of governance as they are accelerated by it. International debates around financialization, and wider concerns of how locations develop, would benefit from this account of the often-hidden nature and agency of local government funding systems.

Developing “place leadership” when hierarchical accountability is omnipresent: the case of English sub-national government

“…If significant divergence takes place after sign-off of the local assurance framework, "adjustments may need to be agreed by the Accounting Officer for the Department, in consultation with relevant Accounting Officers across Government" (MHCLG, 2019b, p. 15). These requirements build on broader, pre-existing structural constraints on local government funding and conventions of financial accountability in England (Muldoon-Smith and Sandford, 2021).…”

“…In their case, the electoral chain of command is expected to apply to matters outside their direct control: in other words, the agent does not control the matters for which the principal (the public) is expected to hold it “accountable” (Sandford, 2020). English local authorities experience a less acute mismatch between powers and responsibilities, facilitating traditional accountability mechanisms – particularly given the recent increase in the proportion of funding raised locally (Muldoon-Smith and Sandford, 2021). However, overlaps exist within local authorities too, in areas such as public health, flooding, housing and transport, and thus the findings here will be of interest to areas without metro-mayors.…”

Financial resilience! A comparative study of three lower tier authorities in England

“…This resulted in it becoming progressively harder each financial year for local government to balance their budgets during the “Age of Austerity” (Ferry et al., 2017, p. 221), amidst concurrent and competing rationales and programs (Ahrens et al., 2020). The financial sustainability of local government was therefore a serious issue, which escalated longer term issues around local government audit and accountability arrangements (Ferry & Ahrens, 2022; Ferry et al., 2015) and importantly local government solvency (Ferry et al., 2015; Ferry & Murphy, 2015, 2018; Muldoon‐Smith & Sandford, 2021; Murphy et al., 2019).…”

“…Austerity has been around in English local government for over a decade with central government reducing their funding to local authorities by 49% between 2010 and 2018 (Eckersley & Ferry, 2020). Muldoon‐Smith and Sandford (2021, p. 6) discuss the “sustained reduction in central transfer grants to English local authorities from 2010 onwards” and that local authorities cannot easily find replacement funding to fill the large gap. The arrival of the COVID‐19 pandemic in 2020 alongside austerity, Brexit, and climate change has added significant pressures as central governments juggle their budgets to fill the gaps created by the national lockdowns (Ahrens & Ferry, 2020, 2021), accentuating local government challenges for their budgets that are already stretched by the decade of reduced funding under austerity (Muldoon‐Smith & Sandford, 2021).…”

“…It is unlikely that central government grants will return to the levels of pre-austerity anytime in the near future. The Local Government Association (LGA) predicted that one in five local authorities will be facing bankruptcy (Muldoon-Smith & Sandford, 2021) and two local authorities have already succumbed to the pressures of austerity. In 2018 Northamptonshire County Council issued a Section 114 notice (essentially a bankruptcy notice), and Croydon Council were unable to balance their budget 5 months after issuing their Section 114 notice in June 2020 (Mackintosh, 2020).…”