Local government still faces the same challenges it did three years ago

"There are pretty evident challenges facing local government right now and across the next few years.  Budgets will reduce in cash as well as in real terms, demand and expectations on services are growing, and there is a proper pressure to improve outcomes and reduce inequalities in Scotland.

"Possible responses to these challenges are also fairly well defined: improving productivity and impact through shared services, a ‘shift to prevention’ and more effective joint working with other public agencies, with the third sector and with communities.” 

This was written three years ago but it might just as well have been written today: the challenges seem much the same and the responses remain ‘possible’.  There are, however, major differences between now and then. 

We are three years further into austerity and some key ways of dealing with financial constraint are getting exhausted (pay restraint, increasing fees and charges, deployment of reserves).  Non-prioritised services such as roads and regulation have taken major cuts (20+ per cent) and probably cannot withstand the same again across the next few years. As importantly, two new and potentially transformational elements now need facatored in as well: Brexit and fiscal and welfare devolution. 

Brexit will affect us in a range of ways but critically, it may impact on workforce capacity in key areas (education, health and care) that are already under pressure. Post Brexit, a critical challenge is for Scotland to have an ‘offer’ that is attractive to inward investment. The quality of our people will be central to that, but so also will be the quality of our infrastructure and the integrity and responsiveness of our regulatory environment.

Given the extensive process of (de)regulation and reregulation likely to follow, the capacity of our regulatory system to advise and support Scottish businesses is also likely to be critical to economic growth. The reduction of infrastructure and regulatory services’ capacity across the last few years is very unhelpful in this context.

Fiscal and welfare devolution will require the Scottish Parliament to balance the need for spending on public services against improving welfare entitlements for the poorest and stimulating business growth, consumption and investment in the Scottish economy. With a weak income-tax base and fiscal receipts sluggish, fiscal devolution may limit public spending in Scotland, not increase it, unless tax rates are raised. A mature dialogue is certainly necessary.

These are truly existential challenges and need a committed response.  ‘Subsidiarity’ has been central to councils positioning on reform: governing and organising services as locally as possible. However, subsidiarity is a practical concept and organising all services x 32, irrespective of their scale and capacity, is now questionable.

Councils often complain about the fragmented ‘regional’ agenda being driven nationally at present. A proper response would be developing a coherent and integrated regional partnership approach to improving capacity and outcomes through sharing. Building on the ‘City Deal’ and ‘Growth Deal’ partnership already in place would be sensible and councils are exploring this.

However, simply organising differently will not resolve underlying finance and capacity issues.  Scottish citizens enjoy amongst the highest universal entitlements to public services in Europe. (Free universal education from preschool to university level; free prescriptions, healthcare and personal care, etc.)

However, we also have relatively low tax rates in comparison to European countries offering equivalent entitlements.  Universal entitlements can be both an efficient and fair way of meeting need but only if we are willing to pay for them.  This is about the balance of the ‘social wage’ and private income we want: not about taxation in isolation. At present, we have greater entitlements than other parts of the UK but the same tax levels. That is simply not sustainable given fiscal devolution and lower economic growth.

These are neither new nor particularly radical observations but we need to get beyond ‘possible responses’ to actually responding. The link between the entitlements the public want and the tax they are willing to pay needs explored locally and around local services. That means honesty about financial constraint and its impact on local services. Equally, joint regional services where separate services can no longer deliver needs to move from ‘talk’ to ‘walk’. The world around us is changing quickly and fundamentally. The range and depth of our response has to match that.

Colin Mair is Chief Executive of the Improvement Service