The final four posts on local government and independence start with a look at money.
Firstly, a word of warning.
Due to the current perilous state of the UK’s public finances – and the incompetence of the last several UK governments – it would be difficult for anybody, let alone me ( without a university economics department or privately-funded think tank at hand) to make any projections on Welsh local government finances for the foreseeable future other than to say “things are looking a bit shit”.
I know full well when to cede to others’ knowledge of public sector economics.
So this post is more about policy options than spreadsheets and graphs. So it all comes with a healthy pinch of salt.
I went over this in Part II, and the TL;DR answer is “around £7billion” if you want to maintain local government revenue spending at current levels.
Revenue funding pays for day-to-day services and ongoing maintenance; capital funding is used to pay for new one-off costs (i.e. building a new school or new road).
There will be a whole host of factors that determine how far that money goes including:
- inflation.
- the political priorities of the party/group in charge of a particular council at any given time – some may promise investments and others may want to keep council taxes low and impose cuts or spending restraints.
- public spending decisions by the Welsh & UK government (i.e. austerity).
- population/demographics – services in rural areas are generally more expensive to provide than in urban areas; councils hosting more businesses and people will bring in more money but may have more complex needs.
- external events that cause budget pressures – i.e. meeting a pay rise demand or new laws placing more duties on councils.
StatsWales has a detailed line-by-line breakdown of how much revenue funding was spent by councils per-head1.
As you might expect, the most “expensive” council services are education and social services (plus policing, which is funded partially via its own precept).
What’s surprising is the relative burden debt interest repayments are compared to some basic council services like waste collection (combined £83.85-per-head across three separate listings in the report), libraries (£13.05-per-head) and planning (combined £7.73-per-head across four listings).
This comes back to the point made during the Williams Commission (and others – Part III) about scale.
Trying to deliver an £825-per-head service (like education) across 22 separate bodies isn’t the most efficient means of doing it due to unnecessary duplication and big differences in spending between different councils. You have to balance the desire for local control with meeting minimum spending levels to ensure a decent service.
You would therefore put education and social services top of the list of responsibilities that ought to be delivered by fewer bodies – whether that’s a county in a two-tier system (Part V), a regional authority (Part VI) or a devolved provincial government.
In the same vein, some services could be delivered more locally by a smaller number of empowered municipalities – the place-based services mentioned in Part V.
A municipality with 30,000 residents would – based on the average per-head spending figures provided earlier – need a ballpark budget of around £392,000 annually to provide library services (£13.05-per-head).
The final figure will depend on factors such as the number of libraries in the municipality, staff numbers, the kind of services the municipal council want to offer and capital investments (such as in new buildings or new mobile libraries).
What tax powers could/should local government have?
Â
Ideally, local government would pay for itself – but that’s not always possible. It happens at the town & community council level and there’s no reason why larger municipalities (Part V) wouldn’t be able to raise most or all of their day-to-day revenue budgets through precepts or council taxes.
At the moment around a third of (unitary authority) local government income comes from taxes (council tax and business rates), with most of the remainder coming from the Welsh Government’s annual local government settlements (around £4.5billion a year).
You would assume that local government settlement – or something akin to it – would continue. If health and other functions were devolved to provincial assemblies, a large bulk of the Welsh health & social care budget would be allocated to the provinces for them to spend as they see fit.
So there could be two separate local government settlements from the Welsh Government – one for municipalities/lower tier of local government and one for the provinces/region tier based on their respective responsibilities.
1. StatsWales, “Budgeted revenue expenditure by service detail” (2021-22). Available at: https://statswales.gov.wales/Catalogue/Local-Government/Finance/Revenue/Budgets/budgetedrevenueexpenditure-by-servicedetail
