We are living through a national crisis. But as the news from Leicester has brought into sharp relief, we are also living through a series of local crises. What started centred in London has now moved to afflict northern towns and cities. It will no doubt move again. There are some patterns. Death rates are higher in more deprived areas — even more so than normal. There is also a lot of apparently random variation; similar, neighbouring areas have often had very different experiences. We can expect more local peaks and troughs over the course of the pandemic, possibly requiring more local lockdowns, and certainly requiring localised policy responses.
That is just the immediate health effects. There is also huge variation in potential vulnerability. Despite high numbers of cases in the early days of the pandemic, London, with its younger and healthier population, is likely to be less vulnerable in the long run than some coastal areas and parts of the north and southwest with more elderly populations.
Meanwhile the economic effects have been, and will be, quite different across the country. In this case London may be quite badly hit. It is far more dependent on public transport than anywhere else. There are a lot of jobs in the hospitality, entertainment and non-food retail sectors in the capital; low-wage jobs in a high-wage area. Some coastal areas, Blackpool for example, with a lot of these service jobs and an older and poorer population, could be doubly or triply at risk.
With such a degree of local variation, local responses are necessary. Yet, as we all know, we live in a highly centralised country. And, as we have all seen, trying to run the pandemic response from the centre has not been an unmitigated triumph.
The crisis is not just having differential effects on health and wealth, but also on local government finances. Many local authorities, which are, don’t forget, responsible for social care, will actually be primarily affected by a loss of revenue. Fewer businesses means less income from business rates. More people out of work means less council tax revenue. They are also getting less revenue from sales, fees and charges for parking, use of leisure facilities and so on.
Recognising the pressures, coming as they do after a decade of sharp cuts, central government has already allocated over £3 billion to support local authorities. But needs vary dramatically. Some district councils rely on fees and charges for more than half their income, others rely on them barely at all. Perhaps counterintuitively, it turns out that councils serving more deprived communities face less revenue risk than more affluent ones. They tend to be less dependent on sales, fees and charges and less dependent on council tax revenues. They also tend to have fewer residents employed in locked down sectors. On the other hand, councils in less affluent areas often have lower financial reserves. But the truth is the variation is so great that support will need to be provided either on an almost case-by-case basis or at a very generous blanket level to ensure all are adequately protected.
As an aside, there are striking parallels here with the findings of another piece of analysis, published today by my colleagues at the Institute for Fiscal Studies, looking at the impact of the current crisis on university finances. Again, there are very big variations between institutions. As with local councils, the biggest cash hits will generally be felt by the better off institutions. But they are not the ones most at risk of going under. That fate is more likely to overtake those which started in the most precarious financial situation rather than those facing the biggest losses. In the short run the cheapest option for government would be to provide very targeted support to those most at risk of going bust. But is that a reasonable way to treat those, be they universities or local authorities, who have, through good planning or good fortune, squirrelled away just enough reserves to survive without additional help? That is a fundamental choice government will come up against again and again as it mops up after the crisis.
Back to the main point. Last week the Local Government Association made its pitch “rethinking local”, asking, even pleading with, Whitehall to recognise the importance and capacity of tiers of government beyond Westminster in dealing with the pandemic and its aftermath.
“For too long, successive governments have worked from Whitehall, in silos and largely out of touch with local communities,” it says. Amen to that. It wants “a financial settlement that takes full account of the local costs of recovery and recognises the benefits of investment directed by those closest to the opportunities for shared prosperity”. In other words, please don’t believe you can run everything out of Whitehall. More decision-making needs to be devolved and based on local needs and local knowledge.
This week Rishi Sunak will present the first elements of a recovery plan, focused on finding ways to avoid, or at least mitigate, the coming wave of redundancies and mass unemployment. We know he will, rightly, announce a lot more money for Job Centre Plus. He will probably also announce a series of job subsidy and training schemes. What he shouldn’t do is impose a one-size-fits-all recovery plan for the whole country with no scope for local decision-makers to use their local knowledge to help maximise the impact of the large sums he will be committing.
The pandemic will lead us to question many aspects of the way we are governed and the way we run our economy. It should certainly lead us to question the dominance of Whitehall and the historical subservience of local government.
This article originally appeared in The Times and is used here with kind permission.
Authors
Paul Johnson
Paul has been the Director of the IFS since 2011. He is also currently visiting professor in the Department of Economics at University College London.
More from IFS
Understand this issue
Policy analysis
Academic research
