The aftermath of the Welsh local government elections. Part 1: Policy context

Tomorrow, the votes will be counted and the results will be known. The changes in political control that will take place in Wales will be largely established. The key question is what happens next?

One thing is certain and that is that the social and economic challenges facing Wales will be different from how they were before the 4th May and they are unlikely to change in the near future. Thus, the only thing that is likely to change is the way in which local authorities in Wales address these challenges.

No doubt the political parties may differ in how they tackle challenges but, in reality, the options available are fairly limited. Local authorities in Wales and the rest of the UK are heavily constrained by factors such as legal constraints, policy constraints from Welsh Government and UK government, funding constraints etc.

This first ‘Aftermath’ piece aims to consider the policy context in which Welsh local authorities now find themselves, whilst the upcoming second article will discuss the policy options available to them.

Current challenges facing local government in Wales
Local government in Wales is facing a significant number of challenges, but the following seem to be of the greatest concern:

Schools
There are many concerns about education in Wales, exemplified by factors such as poor PISA scores in the last three assessments, unfavourable GCSE examination pass rates compared to England, poor standards of teaching and leadership. While each of these factors taken individually may be explained away, when considered together they suggest significant weaknesses in the Welsh schools sector. At the same time, although it is a point of debate, the evidence suggests that schools in Wales are significantly less funded (10% less) than schools in England and while this funding gap may not be responsible for all of the problems in Welsh schools, it must be a significant factor. The funds needed to close such a gap would come to hundreds of millions of pounds, and it is difficult to see where such funding could come from.

Adult Social Care
The growing proportion of the population being deemed elderly is a worldwide phenomenon covering both developed and developing countries. In the UK, we see continuous growth in the numbers of people who are elderly (65+) and very elderly (80+). Elderly people have much greater needs (compared to the population at large) for health and social care services, and consequently both the NHS and adult social care face increasing demands for services.

In England, the difficulties of delivering adult social care to increasing numbers of elderly people have been well publicised and are a consequence of the high costs of delivering residential care and a decrease in the numbers of care homes providing such care. Also, one consequence of BREXIT might be a difficulty in recruiting care staff because many current staff are of East European origin. In turn, difficulties in finding and funding residential care has a knock-on effect for the NHS, whereby elderly patients cannot be discharged from expensive acute beds into social care.

In Wales, the problems do not seem as pronounced, partly because of the relative (to England) limited cuts to local government funding. However, the population of Wales is set to age more quickly than that in England and so this is a potential long-term problem for Welsh local government.

The financial resource situation of Welsh local government
Since 2010/11, the UK public sector has faced a period of what is commonly referred to as ‘austerity’. For many decades prior to 2010, the UK public sector as a whole was used to receiving significant annual increases in funding (in real terms), but the impact of austerity brought that to an end. Over the last seven years many parts of the public sector have received little or no growth in annual funding and other parts have been subject to large scale reductions in funding.

In line with the rest of the UK, Wales has also been subject to the challenges of austerity, but unlike England, the decisions about the distribution of the Welsh block grant and where funding reductions are to be made is undertaken by the Welsh Government rather than individual Whitehall departments.

Within Wales, the reality is that local government has been treated significantly less harshly than English local authorities. Since 2010/11, English local authorities have suffered a decrease in funding of some 10% in cash terms, which implies a much larger reduction in real terms since they have also had to absorb the costs of pay and price inflation within that reduced cash sum.

By contrast, in the same period, Welsh local authorities obtained an increase in cash allocations of 2.5% which again implies a reduction in real terms funding, but a much smaller reduction than that in England. By contrast, the Welsh NHS has been treated less generously than the NHS in England. In recent years funding to the NHS in England has increased by some 0.6% per annum while in Wales the increase has been only 0.1% per annum.

 

Most people would believe that the historic funding decisions made by Welsh Government were largely correct, since it is clear that swingeing cuts in funding to local authorities (as has happened in England) have had a serious knock-on effect on the ability to provide adult social care and the ability of NHS hospitals to discharge elderly patients from expensive acute care.

Add to this the likelihood that overall funding to the Welsh Government will continue to be under pressure because of factors such as the significant and ongoing public budget deficit of the UK government (£52bn in 2016/17) and the recent slowdown in economic growth.

Prospects for additional funding for Welsh local government
One might ask whether there is any likelihood of significant additional funding being made available to Welsh local government. With regard to the Welsh Government grants to local authorities, it will be seen from the points raised above that this is extremely unlikely.

This leaves just council tax and charges.Council tax has been raised in Wales by an average of 3% and it seems that such rises in future years are likely to be economically or politically difficult, particularly if there is an economic downturn.

If we turn to charges, in 2016, the Auditor General for Wales published a report on whether local authorities use their powers to introduce and increase charges on services, how performance on generating income has changed in recent years, and how the process of consulting with users and assessing the impact of charging decisions on users is managed. The findings were that despite raising more money from charging, authorities are not pursuing all options to generate income because of weaknesses in their policies and in how they use data and information to support decision making. This is an area to be considered by all local authorities.