© 2014 Grant Thornton UK LLP. All rights reserved Vision Exploring finance and policy futures for English Local Government SOLACE – West Midlands Mark Stocks January 2015

© 2014 Grant Thornton UK LLP. All rights reserved. The challenge of the next ten years Possible future scenarios Conclusion and recommendations Agenda

© 2014 Grant Thornton UK LLP. All rights reserved. The challenge of the next 10 years

© 2014 Grant Thornton UK LLP. All rights reserved. The English question Experiences elsewhere The wider political dimension What is changing? Developing localist agendas This is a period of unprecedented change and challenge for Great Britain

© 2014 Grant Thornton UK LLP. All rights reserved. Did the Autumn statement 2014 signal a change … financial settlement –government view - local services will not face additional cuts in 2015/16 but acknowledged 1.8% cut in purchasing power –Other commentators by May 2015, Government funding for councils will be 40 per cent lower than in /16 reduction in purchasing power around 6% if Better Care Fund and ring fenced grants excluded Central government funding to reduce by 14%

© 2014 Grant Thornton UK LLP. All rights reserved. Did the Autumn statement 2014 signal a change … no new funding for social care, no changes to the Housing Revenue Account borrowing cap no decision on devolution to local government but strong support for further combined authorities and the role of cities in generating growth Some positives - multi-year funding settlements to embed joint working between health and social care, reviews of business rates structures and licensing simplification So, in summary, another tough settlement but some support for new structures and devolution

© 2014 Grant Thornton UK LLP. All rights reserved. So what will the funding look like in 2019/20? Council with lowest level of anticipated funding MeanCouncil with highest level of anticipated funding Type of council London borough57%74%89% Metropolitan district55%71%81% English unitary66%79%90% Shire county73%82%99% Shire district65%94%100% Region East Midlands66%79%100% East of England65%83%100% London57%74%89% North East65%74%80% North West62%75%100% South East71%84%100% South West65%83%100% West Midlands68%76%100% Yorkshire & Humberside55%73%100% Deprivation Most deprived (Ranks )55%70%99% Ranks %75%100% Ranks %78%100% Ranks %81%100% Ranks %85%100% Ranks %84%100% Least deprived (Ranks )65%91%100% Source: Local Government Association, 'Future funding outlook for councils 2014', p19-20

© 2014 Grant Thornton UK LLP. All rights reserved. Will the Better Care Fund Help? Maybe …. but not yet! Key issues –Projected savings of more than £250m at risk as reductions in emergency activity underpinning them need to be ‘revised downward’ –Most areas are not willing to pool more than the minimum resources –Concerns have arisen over the potential for delivery of social care savings –Providers have had little input into many plans –H&WB Boards have had a limited impact –Joint contracting is limited So this is not offering the solutions to social care demand that were anticipated

© 2014 Grant Thornton UK LLP. All rights reserved. What is local government doing? Approaches to balancing the books – LGA analysis –Maximising income through investment, fees and charges: 40% –Using reserves to support revenue budget: 38% –Increasing the local tax base and New Homes Bonus receipt: 12% –Reviewing how assets can be used more effectively: 12% –Changes to council tax support: 6%.

© 2014 Grant Thornton UK LLP. All rights reserved. What is local government doing? The financial focus of councils – maintaining viability Type of councilFinancial focus Unitary  Efficiency and rationalisation (including reductions in staff terms and conditions)  Service reductions  Charge increases County  Efficiency and cost reduction  Service re-design (including devolution to parishes and the community sector)  Income generation and application of technology London borough  Economic growth  Collaboration and partnerships  Seeking to help communities be more resilient to reduce demand District  Commercialisation  Income generation  Prioritisation (including changing service standards)

© 2014 Grant Thornton UK LLP. All rights reserved. What else should it be considering? What are the economies of the future? forecasting the future is difficult but is key for the future prosperity of areas four possible scenarios that may come through …. –Disney Director – creative industries come to the fore supported by franchise arrangements, growth moves away from London as people search for better standards of living and technology allows easy production –Kick Starter – series of SME growth based on graduate start up companies focussed on technology and digitisation –Materials Magnate – consolidated power of large corporation with control over key material and energy –Extractive Entrepreneur – lack of resources sees exponential growth in waste recycling as populations and demand grow These are only potential scenarios but it is important that local government considers what economy it will be working in Source: Grant Thornton - Future perspectives

© 2014 Grant Thornton UK LLP. All rights reserved. What else should it be considering? Useful economic considerations the importance of economic thinking technology & Moore's Law uneven productivity growth income elasticity of demand price discrimination price elasticity of demand public goods

© 2014 Grant Thornton UK LLP. All rights reserved. How financially resilient is local government to these changes? concerns remain as to whether local government services can meet public need however –very few councils are rated as 'at risk' financially –growing confidence that the risks can be overcome –many authorities maintained or improved financial performance –growth in innovation and strong leadership for some … a path is clearing to self financing for most … a clear trajectory towards financial sustainability for some … a tipping point remains a distinct possibility Source: Grant Thornton, Rising to the Challenge

© 2014 Grant Thornton UK LLP. All rights reserved. Analysis and possible scenarios