Reviving localism - LGiU

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Reviving localism Three challenges

Authors:

Andrew Walker, Jennifer Glover, Ingrid Koehler

Foreword: Three big questions 2017 has been a difficult year for local government, leaving the sector in policy limbo over some crucial defining issues. With Brexit negotiations dominating the headlines, little progress has been made on social care, local government finance and devolution and we finish the year in much the same place we started…with some small exceptions. The announcement of the consultation of the social care green paper offers at least some hope for change, even if it goes nowhere in addressing the immediate problems facing the sector. Social care was notably absent from the Autumn Budget. More business rates pilots are on the cards, but in the meantime councils are on the breadline with no clarity over the future financing of the sector. While the new business rate retention pilot in London is welcome, it is hardly representative of the rest of the country and comes without any broader commitment to a coherent policy programme for local government funding. Another devolution deal has been announced for North Tyne and Wear, suggesting that the devolution train continues to grind slowly along the track. Nonetheless, other parts of the country remain frustrated by the pace of change and the seeming lack of government engagement with policy initiatives like the Northern Powerhouse. There appears to be no further plan for devolution outside the tried-and-tested city-region model, leaving rural areas out in the cold. We are still a long way from the fundamental change the sector requires to help it meet the needs of its communities. With the UK facing one of its biggest constitutional and economic changes in its recent history, local government has an important role to play in keeping the country running – but it cannot do this from a position of uncertainty. As the year draws to a close, it seemed an appropriate time to comment on what this change needs to look like and how we overcome the barriers that prevent us from moving forward. In January 2017, the LGiU committed to exploring three core policy questions over the course of the year: Finance: How should local government be funded? Democracy: How can we strengthen local democracy? Services: How do we design public services that are fit for the future?

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This series of essays draws on the last year of LGiU research and events to explore some of the answers to these three questions.

Day-in, day-out, councils keep the country running.

In her essay Local Government: in the money?, Jen Glover uses the results of our State of Local Government Finance survey, The Local Vantage, our joint publication with the Institute of Fiscal Studies and PwC, and a series of LGiU events on local government finance to provide an analysis of 100 per cent Business Rate Retention thus far. How did we get to where we are, what are councils’ top concerns and how should we address them? Andrew Walker investigates Lessons from the Greater Manchester Experiment in his article on what is currently the biggest innovation in local governance in the UK. He draws on: his ongoing PhD study (which LGiU is supporting with Queen Mary, University of London); Beyond Devolution, the report of the LGiU’s Devolution Network of council leaders and chief executives; and our work with the Fawcett Society on women’s representation in local government. Adult social care has inevitably held an important position in our 2017 programme. Our report with Mears, Paying for It highlighted the human cost of low priced home care and called for a new locally driven national plan for social care. Alongside this we have developed a new app – CoCare – with Kingston Council, to support outcomes-based commissioning. In her essay, A New Settlement for Social Care, Ingrid Koehler uses this research to describe the unfolding crisis in adult social care and outline the crucial steps central government must take to address this challenge.

Recommendations Our research over the course of 2017 has demonstrated a need for radical change in local government if it is to continue to meet the needs of its communities. Partly this requires innovation in the sector itself, but it cannot succeed without strong leadership and support from central government. We call for government to deliver:

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A Mayors’ Senate, giving directly elected mayors from individual and combined authorities a firm constitutional role, shaping Brexit and scrutinising legislation.

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A Local Finance Commission, led by local government, to carry out a systematic review of how local areas are funded based on the expertise, knowledge and experience of local leaders.

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We hope ●● you will work with the LGiU in ●● 2018 to find solutions ●● to these challenges and help us to continue to provide an independent provocative voice for the sector.

A Constitutional Settlement which will provide a framework and consistency over the roles and responsibilities of central and local government. A Devolution Reboot to provide a renewed impetus to devolution and continue devolving power to the cities and regions of England. An immediate sector-led Review of Adult Social Care Funding to shape the promised green paper in Summer 2018. Short-term funding to plug the immediate financial gap in adult social care. In 2018 we will focus our energies on removing roadblocks to these changes and supporting real progress on the core issues affecting local authorities. Day-in, day-out, councils keep the country running. We are in the midst of one of the biggest constitutional changes we have seen in our recent history and need stability from our institutions. But local government cannot play its part without clarity of purpose, a clear sense of direction and meaningful autonomy. This series of essays explores some of the immediate challenges facing local authorities: finance, devolution and service delivery in times of austerity. We hope you will work with the LGiU in 2018 to find solutions to these challenges and help us to continue to provide an independent provocative voice for the sector. For more information, go to www.lgiu.org.uk Lauren Lucas, Head of Projects, LGiU

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Contents Foreword1 Lessons from the Greater Manchester experiment6 Local government: in the money?

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A new settlement for social care

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Lessons from the Greater Manchester Experiment

Andrew Walker discusses the Greater Manchester experiment in devolution, lessons learned so far and challenges that remain.

The UK is going through a period of major change. It is not all about Brexit, however. There is a significant development in the country’s governance, as new institutional structures have recently been established in some English city-regions, led by directly elected metro mayors. 6

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Greater Manchester has been particularly adept in its use of evidence...

Greater Manchester was the first city-region to make a deal with the government to establish just such a combined authority, bringing a range of powers down to the local level and establishing an elected mayoral office. It is widely recognised as the “furthest ahead” of the city regions, with the longest track record, and it is in many ways the pattern that others will try to follow. It is still early days and certainly too early to judge properly the success of the mayoral combined authority model. Indeed, it is still an open question as to how we might go about judging that success. But two years down the line, and a few months after the mayoral election, what lessons can we take from this experiment in governance? As the mayor grows into this new role and as the combined authority beds in as an institution, it is an opportune moment to take stock of how we got here, where we might be heading and what lessons we can learn for democracy and devolution elsewhere in the UK. Drawing on interviews with leading figures in Greater Manchester local government, conducted for my PhD research with LGiU and Queen Mary, University of London, this article will assess the progress and prospects of devolution in Greater Manchester. Some key lessons stand out so far, which will be of interest to other areas pursuing local devolution: 1. Build a strong narrative about the place. 2. Take a pragmatic approach to collaboration, compromise and partnership. You don’t have to solve everything at once. 3. Gather good quality evidence and deploy it effectively with the right infrastructure and institutional support. Greater Manchester has been particularly adept in its use of evidence, both in policy design and backing up the demands it makes of central government. The local leadership has also made a strong impression in terms of the cohesive, collaborative face it presents to the outside world. This is a conscious and pragmatic decision that builds on a long historical narrative, a “Greater Manchester story”, enabling dialogue with central government and helping to forge a political identity. As well as these lessons, interesting challenges remain, particularly in terms of how citizens relate to the combined authority and how the institutions develop in democratic relation to those citizens. This is particularly pertinent given that we are yet to see how mayoral soft power will function in combined authorities.

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The Deal In November 2014 a picture was released of the leaders of the ten boroughs in Greater Manchester, eight of whom were Labour party politicians, signing a deal with George Osborne, then the Chancellor of the Exchequer. It was a political coup on many fronts and signalled a sea change in English governance. The deal was the first of a number of devolution deals that were agreed between central and local government. “Balanced economic growth” across the country was the aim and combined authorities in city regions were to be given the tools and the incentives to promote business activity outside London. The deals also devolved powers over transport, infrastructure and skills development and there was, subsequently, a focus on public service reform. Further announcements were made following the initial deal and soon powers over housing and spatial planning began to emerge, followed in early 2015 by the somewhat unexpected (to those outside Manchester or the Treasury) announcement that Greater Manchester is to be responsible for its own £6bn health and social care budget. In return for this increase in collective control of policy and spending at the local level, it was agreed that the Combined Authority would be led by a mayor, directly elected by the people of Greater Manchester. The expansion of directly elected mayoral offices is one of the most significant recent developments in the structure of governance of the UK. The first mayor of London was elected in 2000, and the model has spread slowly but surely to other cities across the country, with varying powers, roles and responsibilities attached. This May there were elections in six English city-regions for directly elected metro mayors. Andy Burnham won the contest in Greater Manchester, based on a larger turnout than many anticipated. Within a month it was his role to lead the civic response to the bomb attack on the Manchester Arena. Shortly after his election he made a range of announcements, including policy portfolios to cabinet members, signalled his intention to tackle homelessness, not in his remit as mayor, and proposed a redraft of the Greater Manchester Spatial Framework. He has also released several high profile statements, including one with his Labour colleague in the Liverpool City Region, Steve Rotheram, criticising the government’s decision to build Crossrail 2 in London, while dragging its feet over transport infrastructure in the north.

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This is, perhaps, just what we should expect from such a high profile civic leader with a democratic mandate from a large population.

The devolution deal is only the latest episode in a much longer story of collaboration in Greater Manchester.

Mayoral roles and responsibilities are fairly clearly defined and circumscribed in legislation and the contractual arrangements with government, but there are still plenty of unknowns within what is a novel form of governance and power in the UK.

A collaborative narrative The common background in discussions of Greater Manchester is the long history of partnership and collaboration between the ten boroughs, which puts it a long way ahead of other parts of the country. This is a neat narrative that papers over some of the cracks and ignores some of the tensions. Narratives are important, of course, and their impact can be profound. When people in Greater Manchester speak about what is happening there, it is immediately apparent that this story means something to them, that it sets them apart and has helped them to forge a specific political culture. The devolution deal is only the latest episode in a much longer story of collaboration in Greater Manchester. “Integration” has a long history in the area, going all the way back to James Niven who, as Medical Health Officer in Oldham in 1886, and Manchester in 1922, pioneered a strong public health programme linking urban housing and employment. By the 1930s Manchester and Lancashire County Council were regarded as the leading lights in health and social care integration. They provided an example for many other local authorities and health organisations in how to work together and join their services. Graham Stringer’s pragmatism in the 1980s is another part of this narrative. As leader of Manchester City Council he helped move it and its neighbouring authorities away from outright opposition towards central government. Instead the councils sought a more collaborative relationship with each other and a more productive one with Westminster. The Association of Greater Manchester Authorities (AGMA) was set up around this time to provide institutional space for cooperation across local authority boundaries, coordinating important services, such as fire and rescue, police and public transport. The districts’ co-ownership of Manchester Airport and its related assets undoubtedly encouraged a sense of collective enterprise and shared purpose, manifested in the Metrolink tram system, a major infrastructure project built in the early 1990s, followed by the joint bid to host the 2000 Olympic Games.

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In April 2016 control over the integrated £6bn health and social care budget for the Greater Manchester was transferred to the local level, with the twin aims of improving health outcomes for the population and reducing health inequalities.

The signal success of this strategy was the presentation and acceptance of “Manchester exceptionalism” within influential Whitehall circles. The city’s economic size, and strong cultural identity have been heavily promoted in order to enable Manchester to establish it as the the principal devolution experiment. But it wasn’t all about narrative. Hard evidence has been a vital ingredient of success.

Evidence Claims have been made that Greater Manchester is a worldleading “evidence based city”. The history of the Combined Authority so far seems to back that up. But it is instructive to look at how evidence is used and deployed once it is gathered. The case for Devo Manc played directly into the government’s desire for economic growth. It was a case built on the Manchester Independent Economic Review (MIER), a comprehensive document of evidence, which, in 2009 identified a large disparity in terms of economic growth between Manchester and the South East. In a review of the MIER process, Alan Harding and John Holden say that key to their success was ensuring that there is the right infrastructure and capacity to use evidence effectively. Authorities need the skills to understand evidence and it needs to be deployed properly into service design. This requires technical knowledge, but crucially it also relies on support from across the relevant institutions: “Create demand for evidence, don’t just create evidence. In order for evidence to be influential it needs to be seen as robust and useful by those best able to exert influence on policy.” The MIER found that Greater Manchester’s overall productivity is lower than would be expected from a city of its size. Housing, transport and infrastructure are contributing factors, but the lack of skills suited to a highly productive knowledge economy was identified as one of the biggest impediments. The proposal GM’s leaders made was to address these disparities by transferring significant powers to the right scale. According to one council leader, Greater Manchester was able to make a convincing, evidence-based case “that there’s an appropriate level within which certain decisions need to be made”, and that is the city-region level. Fewer powers were granted to the combined authority than the ten leaders initially asked for, as central government held back control in certain key areas. The authority only has control over the

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skills budget relating to adults over 19 years old, for example. This restricts what they can do in early years. By far the largest (in monetary terms) and arguably the most radical shift in governance is in health and social care. In April 2016 control over the integrated £6bn health and social care budget for the Greater Manchester was transferred to the local level, with the twin aims of improving health outcomes for the population and reducing health inequalities. The scale of this challenge cannot be overlooked. The “experiment” in Greater Manchester involves combining these two crucial services, while managing a £2bn shortfall in the budget. If it is successful it will be nationally, perhaps internationally, significant and is likely to provide a framework for future service reform across the country. The new arrangements in health and social care have been operational since April 2016. The Greater Manchester Health and Social Care Partnership Board (GMHSPB) was established with the aim of producing a joint health and social care strategy for the city. Through these structures, it is argued that devolution offers the potential for developing new forms of governance, which move beyond the integration just of health and social care. It also holds the potential to design social policy, public policy and health policy together, so that goals and decisions are shared across organisational and institutional boundaries. But that has been one of the stories of the Greater Manchester experience.

Pragmatism and Compromise Working in partnership across the city has by no means eliminated all conflict. A senior policy officer told me: “The narrative about collaboration and partnership in Manchester is much stronger in retrospect than it seemed at the time. Agreement across 10 boroughs is hard.” One of the key lessons other areas might take away from Greater Manchester’s experience is the pragmatism displayed by the leaders and senior figures, who have presented a united front in their negotiations with government and a common voice on some of the most important issues that affect the city. There is a real effort to work collaboratively, between the boroughs and with the Combined Authority. Tensions will inevitably arise at certain points because many of the issues are contentious and political. The plans to fix them require careful judgement as well

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as technical expertise and evidence. In relation to the Greater Manchester Spatial Framework a senior policy officer told me:

Imposition of the mayoral model has received a great deal of attention, as has the lack of transparency with which the parameters of the deal have been decided.

“I suppose people will perceive it as being a plan that the Combined Authority are overseeing and so there will be some tensions with that. There will be tensions because each individual local authority has got to sign it off. There will be tensions because each individual local authority will come under pressure from its residents in relation to some of the proposals in it. And I think that will be interesting to see how that all plays out.” Democracy can help to provide the institutional mechanisms to manage this disagreement and conflict. What distinguishes the approach in Manchester from a “Westminster approach” is that intention to manage tensions through dialogue and collaboration across the conurbation. As with democratic institutions everywhere, this story is still unfolding in Greater Manchester.

Bringing citizens back in While it is hoped that there will be a stronger democratic link between institutions and people in Greater Manchester, this will take time to forge. Recognising this challenge, another officer told me: “I think it’s a work in progress, it doesn’t follow as night follows day that if you devolve powers to a local level that people automatically feel more connected to it. You need to understand how local government does connect with its citizens, and so on, that’s an issue for the future.” The leaders have been criticised for the level of public consultation and democratic engagement in the devolution process so far. Imposition of the mayoral model, in particular, has received a great deal of attention, as has the lack of transparency with which the parameters of the deal have been decided. But bringing in the citizens of Greater Manchester is essential, not merely a “nice to have” after the institutions are built and policies designed. Devolution alone will not automatically achieve the goals in health, social care, skills, economic growth and housing, unless it is accompanied by a qualitative change in the way the state functions locally, understanding and working with citizens. The experiment taking place in Greater Manchester is incubating innovative new approaches to tackle this issue, working with the community in different, nuanced ways. With added resources, capacity and institutional heft, not to mention support from a figurehead like the directly elected mayor, groundbreaking

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programmes that already exist in individual boroughs can be scaled up and learned from. In some parts of the conurbation (Oldham and Wigan spring to mind) this support is directed towards projects and initiatives run by the community. A senior policy officer said: “It is trying not to institutionalise good stuff that communities are doing. We are aware that the council can be a bit of a dead hand at times. Our role is often to support and encourage.” This leads, however, to yet another crucial part of this story, in the grey areas that the mayor and the institutions will begin to operate in and the soft power they wield. We have yet to see these play out.

Soft power? Mayors with a democratic mandate tend have an impact beyond the institutional structures within which they operate. Power and influence can spread through governance networks and civil society throughout the urban area more generally, into communities and business. As leaders of place mayors can become symbols beyond their cities and even beyond national borders. But they can also steer and shape policy in subtle and less subtle ways. One of the first public statements Andy Burnham made after becoming mayor was about reducing homelessness in Greater Manchester, which is not within his remit. It was central to his campaign and he has set up a fund, contributing a portion of his own salary. This is the exercise of power by other means. Though in Greater Manchester and other city-regions these powers are curtailed by a cabinet system, it is possible that the influence, profile and mandate invested in one individual through direct election will overshadow the collective. The mayor’s power will be felt through the informal and soft power that their popular mandate brings, as much as through official institutional and circumscribed forms of hierarchy. This is particularly so as part of a mayors role as figurehead is interacting with other parts of government, the public sector and the private sector, for which there are no formal institutional parameters. Personality, individual strengths, and a particular set of political skills will be important. But so will institutional capacity. These can also seep out beyond strictly defined parameters. GMCA’s capacity has markedly increased since forging the deal and since New Economy, the research organisation that carried out the Independent Economic Review, was brought in house. It now functions largely as a policy and strategy unit for the combined authority, with an expanding research agenda driven by the political leadership. Staff are drawn in and seconded from the

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The Greater Manchester experiment will rise or fall on how well it is led.

other Greater Manchester boroughs, the University, and even the Treasury and Whitehall. It does impressive work. But it is also an interesting case study in how institutions can develop a logic that no individual or group strictly controls. Given the importance of evidence in the Greater Manchester story, the role of New Economy as the evidence machine is compelling.

Looking to the future… Challenges lie ahead, naturally. Not least in the complex and strained relationship that persists between central and local government. One borough leader told me: “There will be people within government, both within the civil service and certain members of Parliament who are very happy with the status quo of being a very centralised country where it comes out from Whitehall and Westminster, who will be looking for a reason for this not to work.” The Greater Manchester experiment will rise or fall on how well it is led. Complex questions can be addressed by experts, but it is often straightforward ones that require leadership and judgement. Greater Manchester has built up an impressive track record in gathering and deploying evidence and deploying expertise to address complex questions with innovative, collaborative organisational forms. This must be one of the key lessons that others can draw from the Greater Manchester experience so far. But the answers it could provide for some bigger challenges around the future of local democracy, around the deficit of trust in public institutions, and around new forms of populism and political identity, will depend largely on the decisions made by leaders to deploy the evidence and forge successful democratic partnerships with the citizens of Greater Manchester. It is in these areas, as much as the service reform goals, that the GM model could radically challenge the current state of affairs in how the country is governed. Central government is almost entirely occupied with Brexit, while very little guidance or vision seems to be emanating from DCLG at present. This creates difficulties for local government, but it might also be an opportunity to demonstrate local capacity and ingenuity. The Greater Manchester experience so far may provide some guidance. It is important to structure a narrative about local places, to build strong, pragmatic links across institutional boundaries in the long-term interest, and to combine intelligent use of evidence with strong democratic principles.

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Local government: in the money?

Jennifer Glover discusses the unprecedented financial uncertainty facing councils through the testimonials of senior local government decision-makers.

Given the political turbulence of 2017 so far, it was perhaps inevitable that some important policy issues dropped from the agenda. It is unfortunate, however, that one such issue was local government finance reform.

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The 2020 deadline for the transition to 100 per cent Business Rate Retention seemed ambitious when set by George Osborne in October 2015; after two years of consultations the details have not yet been conclusively decided and it now seems even more so. Meanwhile, each year’s Funding Settlement has and will continue to see the Revenue Support Grant fall steeply until it disappears altogether by 2020. No one knows exactly how services will be funded beyond this point. Councils are rightly wondering whether this timeline is still realistic, what the system will look like, and what they can be doing to prepare for the change.

Where are we now? Local government finance: key developments 2012-2018 April 2013 Nov 2015 July 2016 Jan 2017 April 2017

June 2017 July 2017

Sept 2017

Oct 2017 April 2018

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We need a local government funding system that enables councils to provide quality public services, maintain a strong local democracy and invest in the local economy.

The current financial situation in local government, following public sector austerity and uncertainty around 100 per cent Business Rate Retention, has made decision-making and budget-setting extremely challenging for councils. Core services such as adult and children’s services are under strain and without a clear outline of their medium-term funding it has become difficult to balance the need for investment with the need for saving money. Back at the start of April, before the general election had been called, DCLG was making steady progress towards a concrete implementation plan for 100 per cent Business Rate Retention and the accompanying Local Government Finance Bill was plodding its way through the Commons. Yes, we were complaining of a lack of clarity over technical details and overarching vision, but the movement towards fiscal devolution was at least indisputably in the forwards direction. What a difference six months makes! The snap election blew the Bill out of the water and purdah fell just as local government needed answers to some big questions. The surprise election result threw Government into turmoil and many manifesto commitments got the chop in the desperate scramble to pass a Queen’s Speech. Local government was a major casualty: there was neither mention of reviving the finance bill, nor indication of an alternative plan. Following Parliament’s summer recess, Sajid Javid began September with a welcome announcement detailing DCLG’s plans going forward. More areas are invited to apply to become pilot areas for 100 per cent Business Rate Retention, in addition to Cornwall, Greater Manchester, Liverpool, West Midlands and West of England who began pilots in April 2017. This will come as a relief to many, following three long months without any actionable information from the department and it is reassuring to know that the issue is on the agenda. However, this announcement can only be the start. There will be questions about how the scheme will work without legislation (as the Local Government Finance Bill is unlikely to make a reappearance in the next couple of years), what the transition plan will be for non-pilot areas and whether the 2020 RSG cut-off is still on the cards.

The Challenge We need a local government funding system that enables councils to provide quality public services, maintain a strong local democracy and invest in the local economy. For this to work, councils need enough money to meet their citizens’ needs, clarity about where this funding will come from and the powers needed to control their cashflow and deliver services.

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Business Rate Retention: Top five concerns among local leaders 1. My main concern...

“Ensuring protection around appeals, eg. hospitals becoming Trusts.” Unitary, Conservative Cabinet Member for Finance

“Appeals and discounts being unfunded.” District, Chief Executive

“The problem of uncertainty that appeals cause.”

District, Labour Cabinet Member for Finance

“We are a top-up authority with a fragile tax base and are awaiting the outcome of business rate appeals and revaluation with constrained resources to invest in growth.” Unitary, Chief Executive

Now that DCLG has confirmed that the 100 per cent Business Rate Retention agenda is still moving forward, debate on the technical detail will be resumed. It is an opportune moment to reflect on the concerns raised by senior local government decision-makers before the election, to refresh our memories and to inform this very live policy discussion. In this section, we use the answers gathered in our annual State of Local Government Finance survey* of council leaders, chief executives, directors of finance and cabinet members for finance, to shine a light on the sector’s concerns about the move to 100% Business Rate Retention. We allowed respondents to answer the question ‘What are your main concerns about the move to 100% Business Rate Retention?’ in their own words – and the results tell a fascinating story. We have chosen the top five most commonly cited concerns to focus on. *(The State of Local Government Finance Survey 2017 received 162 responses from 131 councils in England and Wales and was conducted throughout January 2017).

1. Business rate appeals This was the most common concern, with 33 senior local government figures (20 per cent) raising business rate appeals as an issue, unprompted. Appeals are made by business owners when they believe that they have been over-charged on their business rate bill, whether because of error or because their commercial property has been wrongly valued by the Valuation Office Agency (VOA). These appeals can take some time to resolve, and it can be difficult to predict which will be successful and therefore how much will have to be repaid. Historically, the cost of business rate appeals has been taken on by central government, but when 50 per cent Business Rate Retention was introduced in 2013 local authorities became liable for half of the payout. This means that authorities must now hold back large sums of money to cover potential future payouts, money which cannot be used to fund services or operations. Councils have complained that the volatility this has introduced makes financial planning extremely difficult. Indeed, the National Audit Office raised

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2. My main concern...

“The system needs to address the differentials in local appeals impact and performance of the VOA.”  Unitary, Chief Executive

“The length of time taken to review appeals over rateable value.”

Unitary, Labour Cabinet Member for Finance

“Funding the cost of appeals over which authorities have no influence.”  Unitary, Chief Executive

3. My main concern...

“Being required to take on additional services without adequate income to pay for them.”  District, Labour Cabinet Member for Finance

“The government will take the opportunity to increase burdens by a greater amount than the increase in funding.”

Unitary, Conservative Leader

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this issue in its report in March on 100 per cent Business Rate Retention and wrote that DCLG would be addressing it in their planning. Although details about the next steps have yet to emerge, it has been suggested that local authorities will take on the full amount if/ when 100 per cent Business Rate Retention arrives, which would amplify these problems if left unaddressed.

2. Business rate policy The other part of this problem, linked to the appeals issue, is that central government still dictates business rate policy nationally, which means that if local authorities become reliant on business rates to fund their services, their income will still be subject to changes imposed by Whitehall. For instance, central government decides when commercial properties are revalued by the VOA, which affects the level of business rates that councils and the Treasury will receive. This usually happens every five years, but for the most recent period the gap was extended to seven years. As a result businesses experienced a steeper rise or decline in payments than usual and, although revaluation is fiscally neutral on a national scale, local areas saw their business rates take rise/decline more steeply too. Following complaints from businesses, DCLG then announced a £300m relief fund for small businesses who experienced the steepest rise. Similarly, the Government still retains control of the resources given to the VOA (and therefore the speed/accuracy of the valuation and appeals process), the level of relief available and the type of organisations that can apply for relief, among other things. It is not clear how councils would be compensated for decisions made through national policy under 100 per cent Business Rate Retention, or whether any of these powers will be devolved. At the very least local government should be guaranteed a seat at the table when these decisions are made and should be reimbursed for losses caused by national policy.

3. New responsibilities that might be devolved The Government has previously expressed its interest in devolving new responsibilities to local authorities alongside business rate retention but there has been no further detail given about what these responsibilities might be. Twenty-one (14 per cent) respondents to our survey raised this issue, expressing nervousness about which responsibilities could

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be devolved, whether they would have enough money to fund them and when they might find out. “Responsibility for demand-led services will be devolved without adequate funding.”

Many respondents, from across the political spectrum, were wary of the intentions of central government and expressed suspicion that 100 per cent Business Rate Retention, and fiscal devolution more generally, would be used as an excuse to move more duties into local government without adequate resourcing. For instance, the introduction of the Homelessness Prevention Act earlier this year placed several new responsibilities on local authorities but they have not as yet received what most would consider sufficient extra resource to cope with them.

“We will be given more responsibilities which devolved business rates will be insufficient to cover.”

4. Whether the business rate system itself works

County, Conservative Cabinet Member for Finance

Unitary, Conservative Leader 4. My main concern...

“Many of our businesses are internet-based or micro enterprises, so contribute to skills, employment and innovation but do not generate high business rates. Business rates may incentivise land use but not enterprise and innovation.”  Unitary, Chief Executive

“Reductions in land take from robotics etc.” Unitary, Chief Executive

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Is the business rate system itself up to scratch? Just under 10 per cent of respondents felt that the wider business rate system is flawed and is not a suitable mechanism for sustainably funding local services. This criticism arose from a number of sources. Some respondents weren’t confident that the government understood the consequences of funding (newly-devolved) demand-led services with a volatile funding mechanism like business rates, pointing out that areas with high need often have a low business rate tax base. Areas with a low business rate intake, like many counties, are also the areas most likely to have high demand for adult social care services, for example. They worried that this would lead to greater funding insecurity. An additional factor leading to volatility, is the proposed move to change the inflation index to which annual business rate increases are linked, from RPI to CPI from April 2020. This is expected to lower the amount paid by businesses, and therefore the intake for local government. Others echoed concerns expressed by the private sector that business rates as a form of taxation is skewed and unfair for ratepayers. Business rates are calculated using property value rather than a measure of how much money a business makes or how many people it employs. Therefore, traditional retail and industrial businesses often pay more than, say, an online retailer without any shop space or a software company operating from a small office but employing highly-skilled staff. There are also concerns about the incentives 100 per cent Business Rate Retention provides. It has been argued that it will merely incentivise councils to increase commercial floorspace, by attracting a new power station or retail development, rather than investing in improving existing commercial property stock or

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more broadly in a healthy local economy with job security, skilled industries and adult education. “In our area, we have slow land use growth (intensification of commercial use rather than property valuation growth).”

District, Lib Dem Cabinet Member for Finance

“The decline of high streets to online retail.” Unitary, Chief Executive

“Unfair burden on commercial property companies as opposed to the growing number of internet-based companies who do not pay.” District, Conservative Leader

5. My main concern...

“Ministers may pull a fast one and say, ‘Oh yes you can do this as well’.” District Chief Executive

“DCLG will use this as a way of creaming off more income for the government.” 

District, Conservative Cabinet Member for Finance

LGiU | Reviving localism

5. Suspicion of central government’s motives Far from being a party political issue, mistrust in central government was brought up unprompted by senior figures from Conservative, Labour and NOC councils alike. In fact, of the 14 people who raised this as a concern, six were Conservative politicians (council leaders or cabinet members for finance). This is a striking finding, and something that ministers should take very seriously in their future discussions with the sector. Trust has been eroded between central and local government, after years of fractious relations. Because local government has no constitutional status councils are subject to changes in the Westminster political wind; thus the balance of power in this country has been skewed towards the centre in recent history. This tension can be seen in examples such as the effective capping of council tax increases in 2011 at the same time as huge public sector budget cuts, a move that was criticized for drastically reducing councils’ financial autonomy. More recently, councils received a threat from DCLG warning them to reduce delayed hospital discharge rates (‘bed-blocking’) or face social care funding cuts. With repeated requests for support tackling the social care crisis being largely ignored, the tone of this latest announcement left a bitter taste for many in local government and the policy itself seemed to miss the point. Mutual trust must be restored if the right decisions are to be made on future funding arrangements. Arguably the devolution process went some way towards rebuilding the relationship on an equal footing by asking local authorities to shape the process to a certain extent. However, now this process has ground to a halt it’s unclear where we should be looking for opportunities to continue this tentative progress.

The bigger picture Recently, the debate on local government finance has centred around business rate retention, as this has been the policy change with the biggest immediate impact. But of course the sustainability of the system depends on more than just business rates: council tax, fees and charges and grants are also essential parts of the mix. Council tax accounts for 15 per cent of a local authority’s income on average, a significant portion. Although conceived as a locallycontrolled mechanism, it has been effectively capped at a two per cent annual increase since 2013 meaning that local authorities

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“Central government is totally untrustworthy – we have just lost big time on the New Homes Bonus.”  Unitary, Conservative Cabinet Member for Finance

“I am cautiously confident at this point, whilst understanding that central government always conspires to take away any financial gain we secure.”  District Chief Executive

“It’s a con.” 

have limited control over this area of their income. Pushing for the removal of the cap would give some breathing room, but, as with business rates, council tax has its downsides and local authorities have limited control over the system itself (eg. revaluation frequency, reliefs and exemptions). With council tax intake constrained and public sector spending cuts biting, many councils have turned to the only other fundraising tool they have real control over: fees and charges. Most councils have made heavy use of these to raise extra money in straitened times, increasing fees for services like parking, planning and waste. However this can often prove unpopular with residents who have come to expect certain things from their council and wonder where their council tax is going. Some councils also find that introducing new or higher charges leads to perverse incentives and negative outcomes: higher waste collection costs may lead to an increase in flytipping, and high parking charges may reduce high street footfall and therefore damage local retailers. Grants from central government have been a key feature of the local government ecosystem for some time, for specific areas like education, public health and house-building, as well as the general Revenue Support Grant (RSG) distributed according to need. As it stands, the RSG is due to be phased out by 2020 (to be replaced by locally retained business rates as discussed above) but as yet there have been no changes announced to the other grants.

District, Conservative Leader

It is worth considering whether these mechanisms are working, how they could be improved and whether any new local levers could or should be introduced.

“Government do not keep to their word and make late changes and announcements.” 

This requires a bigger conversation about governance, accountability and expectations – the choices we make about funding have a direct impact on people’s quality of life and their ability to engage with the political structures that affect them. An under-scrutinised aspect of 100 per cent Business Rate Retention is the increased influence it will likely give to local businesses as councils become more reliant on them for their funding. Although not necessarily a bad thing in and of itself, we must ensure that adequate checks are put in place to preserve the voting power of citizens.

“Experience shows they will shift resources to rich authorities in South East and away from North.” 

This is not a sustainable situation, particularly if councils are going to be assuming new responsibilities. When combined with business rates income (a volatile source) councils will have very few levers at their disposal to balance the books each year. If councils are expected to take more of a role in local growth and to become financially self-sufficient, they must have more freedom to influence their income. It would be worth considering a wider range of powers, such as local VAT, local income tax or tourism tax, in order to make financial devolution work.

District, Conservative Cabinet Member for Finance

Unitary, Labour Leader

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LGiU | Reviving localism

What do we need from government?

Whatever the crisis, local government keeps the country running, but it cannot continue to do this without a sensible and sustainable funding settlement.

With this in mind, it is worth asking what local government should look like in order to be able to fulfil its current (and future) roles. How can we build trust between different levels of government? What really is the fairest way to pay for services? How do we pay for adult social care specifically? What new powers, like local VAT, local income tax or tourism tax, could be introduced? And most importantly, how can we reinvigorate this debate and shift the dial? We call on government to rebuild trust with local government and support the sector in pursuing the right approach for their citizens. We ask that the government: 1. Urgently provides clarity about how local authorities will be funded in the immediate future; 2. Opens a meaningful dialogue with local government to discuss their concerns and ideas, as the first step to rebuilding mutual trust; and 3. Develops and pursues a meaningful and holistic strategy for further devolution in consultation with the sector. LGiU is already making headway shaping the future of this policy area through our Future of Local Government Network. We have been touring the country hearing from council leaders, chief executives and policy-makers about the major issues of the day: finance, sovereignty, democracy and leadership. The final report, due to be published next month, will contain a commitment to set up a Local Finance Commission to start mapping the path ahead. Our recent work with the Institute of Fiscal Studies, The Local Vantage, also feeds into the discussion by providing data-driven insights on the current context. Whatever the crisis, local government keeps the country running, but it cannot continue to do this without a sensible and sustainable funding settlement. Now more than ever, it is essential that councils’ views on their own funding are taken seriously and that we engage in a wider debate about how and why we pay for local services. Our Local Finance Commission will start this debate. 

LGiU | Reviving localism

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A new settlement for social care

Ingrid Koehler argues that local government needs to control the reform of the social care policy framework if central government continues to abdicate its responsibilities.

The facts are bad enough. They’ve been bad enough for long enough to take radical actions. We have outlined plenty of harrowing facts about adult social care. Others have, too.

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LGiU | Future of local government

Some of the bleak facts include: ●●

Delayed discharge from hospital, pejoratively called ‘bedblocking’: too many older people who could have been discharged are staying in hospital because of the lack of appropriate support at home or a place in residential or nursing care. There has been a 130 per cent increase over the past four years1, with worse to come. The winter of 2017/2018 is ‘predicted to be worst ever’, which puts increasing pressure on an already creaking NHS cold weather service.

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Provider failure: care companies are going out of business at an increasing rate. Research by LGiU and the Association of Directors of Adult Social Services (ADASS) indicates that provider failure rates are doubling2.

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Lack of money: the Local Government Association (LGA) estimates that over a billion pounds is necessary simply to shore up the independent care market3.

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Rising demand: there are already over a million people in the UK with unmet care needs4 against the backdrop of rising numbers of older people as a percentage of the population. These grim statistics barely scratch the surface of what it’s really like to have inadequate care or to worry about how you can keep your job and look after mum and dad. And yet, no radical action has been taken. We have a system that we’ve reached through incremental reform that serves no one well: not the people who need care, not the people who give care and not individuals or institutions who pay for care. It’s no longer sufficient to outline how the system is letting everyone down or to bemoan the complicated and interrelated circumstances that mean it’s quite complicated to fix on a solution. Instead it’s time to make genuine progress towards an adult social care system that addresses the needs of older people and their families. While there is still much more that local government can do, namely transform the way that care services are commissioned, the social care crisis cannot be solved by local government alone – central government must step in to address this crisis. Yet, it is only through local control of both support and preventative services that we have a chance of helping older people continue to live independent and vibrant lives. This seeming contradiction has led some national politicians to either ignore the important role 1 https://nhsproviders.org/the-rise-of-delayed-transfers-of-care 2 Paying for It: The Human Cost of Cut Price Care; LGiU; March 2017 3 Adult social care funding: State of the nation; Local Government Association; October 2017 4 Unmet Need for Care, Final Report; Ipsos-Mori; July 2017

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It is past time for a concerted joint effort from both central and local government to fix things, but if central government cannot or will not act, then it is time for local government to take the power to sort this out.

of local government or to focus entirely on the possibilities of a national care service. But these centralising tendencies ignore the place of community and connection for people who need care. It is past time for a concerted joint effort from both central and local government to fix things, but if central government cannot or will not act, then it is time for local government to take the power to sort this out.

Why care must be local The vast majority of interactions that individuals have with government is through local government. Local government and the management of place determine the kind of environment we live in, the kind of community we have and even the background to forming our most important social connections. Councils may not provide us with friends, but they often deliver or at least provide a platform for the places we meet and make friends from community centres, to sports grounds to planning permission which takes account of social needs or licensing for public houses. Local government both understands and supports the social fabric that is knit through volunteering and community services and the opportunities of circumstance and propinquity. Looking after granny can never just be about paid care. Humans need connection to feel valuable and these connections must be mutual. This doesn’t mean that there isn’t an important place for paid-for care, but rather that paid care can never address all of people’s emotional needs as well as their physical needs. Social isolation and loneliness can play a role in overall health outcomes, declining cognition and early death. Neighbours, local social organisations and families all have a role in supporting those who need care and only local coordination paired with deep knowledge of what’s happening locally can bring these socially vital elements together alongside paid care when and if that becomes necessary. The 2017 Labour manifesto called for the establishment of a national care service and while this is a better option than some which proposed an NHS takeover of care, a national service cannot help but be prescriptive and policy driven rather than person focused and tailored to individual needs. Like the NHS, there would always be a tension between the hard cases of great need and prevention, rehabilitation and life enhancement. Only a locally planned and provided social services has the potential to combine community and care. And though social care must be locally determined and locally delivered, local government is not without fault. Local governments have individually failed to address the impact of underpaying for social care and they have continued to commission services in a way which focuses on time and task and drives providers,

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LGiU | Reviving localism

Most councils support outcomesbased commissioning as an ideal, but very few truly achieve it.

commissioners and care workers to look at care as units of time alone – without focusing on individuals and their social needs and desired outcomes. We know that local authority commissioners want to change the way that care is commissioned, but bit by bit we’ve come to a place where it seems almost impossible to wean ourselves away from cost-driven units of time to a more focused way of supporting people to live more independently and improve or to deliver a graceful decline. Most councils support outcomes-based commissioning as an ideal, but very few truly achieve it. The key problem is not lack of will but lack of information. It is not easy to collect nuanced information about people’s changing social care needs, progress toward personal outcome goals or changes to health conditions. It’s harder still to analyse this information in a comprehensive way to support outcomes-based commissioning and reassessment of care to provide the most appropriate and tailored social care plans. Social care at home has not, by and large, benefitted from great advances in the use of technology, but technology can bridge this information gap. For example, Kingston Council is working with LGiU and others to develop new methods for easily collecting and analysing the right set of information to support integrated care between family members, care providers, the voluntary sector and trusted others to deliver outcomes with people in their own homes. CoCare is an app5 and information portal that has been developed within local government with care workers and people who need care to truly support outcomes delivery in home care. It quickly and easily gathers information that supports commissioning based on achievement of personal outcomes while putting the person who needs care at the centre of a caring network that can quickly and easily communicate with each other.

Urgent care at the national level While long-term solutions to care funding for individuals of both moderate and reduced means must be solved, there are even more urgent matters. In our recent publication, Paying for It, we looked at the human cost of driving down prices in domiciliary care. Understandably, local authorities are seeking to support as many people as possible in the face of rising demand and stagnating (at best) and falling adult social care budgets. Rising costs within adult social care, particularly wage bills as the legal minimum wage rises through the National Living Wage, mean that independent 5 www.thisiscocare.co.uk

LGiU | Reviving localism

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social care providers are facing a terrible squeeze as budgets shrink, costs rise and individuals who are eligible for care have increasingly complex and therefore often expensive needs. We’re in a perfect storm for potential failure, a toxic recipe for disaster – local authorities can no longer afford to pay for care for all that need it and providers in many places can only provide decent care and pay their workers decent wages if they do so at a loss. While some providers struggle on for a while or try to renegotiate prices, no business can afford to deliver services at a loss indefinitely and many providers are exiting the care market through either a strategic decision or through insolvency. There is evidence that the rate of market failure has doubled over the last couple of years and while thus far, local authorities have managed to handle these crises well, there is a limit to how much they can do. Individual social care must always be determined locally, but councils simply do not have sufficient resources to provide high quality care to everyone who needs it and meets eligibility criteria. This is simply a matter of money. With limited means to raise revenue, councils are dependent on national funding, and this national funding is no longer sufficient. Councils are running out of money and not only is there insufficient funding nationally, there is little clarity at all for how councils might raise sufficient funds locally. Plans for business rates retention and the future of local government finance, like the plans for helping people to pay for care, have been kicked into the long grass. Councils are at the whim of national policy with statutory responsibilities to fund increasingly expensive services without the means to pay for them or the regulatory framework to help citizens pay for services themselves. We were initially promised a Green Paper on adult social care before the end of 2017. This has now been postponed until 2018, and there has been little sign of a steady policy state. The Commission on Funding of Care and Support (the Dilnot Commission) published its findings in May 2011 and some of those recommendations were incorporated into the Care Act 2014, but the fundamental recommendations around a lifetime cap on social care payments or a ‘fairer’ asset disregard to allow people to pass some assets to their families are yet to be realised Although the Conservative manifesto did make some attempts to address the imbalance of social care funding, it did so at an electoral cost. House rich and cash poor individuals can have home care funded by the state, whereas people who need residential care must fund it from the value of their assets including their homes. This very proposal may well have cost the Conservatives their majority at the snap election in the summer of 2017.

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LGiU | Reviving localism

Councils are running out of money and not only is there insufficient funding nationally, there is little clarity at all for how councils might raise sufficient funds locally.

The proposal was branded a dementia tax or described as an end-of-life tax. But it has some hallmarks of fairness. Only a small proportion of the population at large have a huge proportion of public resources spent on them for adult social care, perhaps fewer than 10 per cent of older people who need some kind of help to live independently. Maybe those that have the resources, however illiquid, should be paying for their care, at least to some extent, as they age. People rightly fear being bankrupted by the cost of care, and maybe that’s why there was such a visceral reaction against these proposals. The trend is that we will live longer, but live longer with a range a long-term health conditions that means more of us will need help to live independently. These costs and needs cannot necessarily be accurately predicted in middle age either, making it difficult to plan. Currently there are almost no effective, affordable long-term financial products to protect individuals, families and their estates from potentially ruinous costs of care. While it is almost certainly no longer possible for the state to fund comprehensive social care for a significant part of the population from general tax receipts at either the national or local level, there is much that the state can and should do, including doing nothing, that might improve the situation. But all of these options require reaching some kind of political consensus about how social care should be funded, and we can no longer continue with the possibility that the matter will be sorted, soon, if not this year, then next year or the next. It matters less what the solution is than that there is some kind of certainty around who pays for what so that financial services can build products around need and circumstance. In the United States, for example, where there is a clear understanding that most individuals will be responsible for the cost of their care, individuals can and do insure against the possibility of needing care in later age and products can deliver assurance against the ruinous costs of either residential or domiciliary care.

Sharing the cost Although the market is likely to be part of the solution to paying for social care, ideally we can provide more and better than a purely market solution. In terms of health care spending, the UK is at the more generous extreme of cost sharing between the state and individuals6. The state directly covers the lion’s share of health care costs through (more or less) general taxation. But in terms of covering social care costs, England is on the opposite extreme. 6 The Social Care and Health Systems of Nine Countries. Background Paper: Commission on the Future of Health and Social Care in England, 2014

LGiU | Reviving localism

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Other than those with very few financial assets, individuals in England pay for almost all of their own social care without either state co-payment or a subsidised and regulated insurance market to help people pay for care. In most Western countries, there is a system of cost sharing and mandatory social insurance for both health and social care. But even in countries like the United States where there is little social care cost coverage except for those of limited resources, social care insurance which covers both home care and residential care is available, though generally speaking only for those of relatively generous means. The United Kingdom must look at a system of social insurance to cover later life social care and a fairer system of cost sharing between society and individuals and a fair provision across Great Britain as funding for social care is different in Scotland, Wales and England in decreasing generosity.

A social care funding model needs to be designed by councils in consultation with practitioners, social care users, family members and – yes – central government.

This all requires national attention and focus resulting in a national policy framework that understands that social care can only be delivered locally and within a local context. Central government has singularly failed to deliver this. This is not a matter of political colour but a matter of political place. The centre can complain vociferously about the problems local government is causing the NHS through ‘bed-blocking’ and it can draw up a new social care green paper eventually, and perhaps largely in secret, but without a real solution to the crisis of funding at both local authority and individual family level – that does not foist responsibility onto councils and families in what feels like an increasingly punitive regime – nothing will be solved. Already there are threats to withhold promised emergency social care funding if bed blocking rises, meaning that much needed cash will be clawed back if hospital discharges cannot be speeded up substantially.

A new settlement for social care It is time for local authorities to stop advising and start devising. A social care funding model needs to be designed by councils in consultation with practitioners, social care users, family members and – yes – central government, which can address the fundamental needs of the social care system including refocusing home care from time and task to individual outcomes.

We call on central government to: ●●

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Settle the funding crisis in the short term by making funds available to address the long-term funding needs in adult social care.

LGiU | Reviving localism

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Convene a congress of local authority leaders and directors of adult social care in consultation with service users, carers, the third sector, independent providers and the financial services to develop a robust, realistic, resilient framework for social care funding. If central government is unable to do so, then local government must.

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Provide funding for pilots and further research on outcomes based commissioning and evidenced based care planning in adult social care.

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LGiU is a local authority membership organisation. Our mission is to strengthen local democracy to put citizens in control of their own lives, communities and local services. We work with local councils and other public services providers, along with a wider network of public, private and third sector organisations.

LGiU Third Floor, 251 Pentonville Road, London N1 9NG 020 7554 2800 [email protected] www.lgiu.org.uk © LGiU December 2017