Cuts in government grant and increased demand for social services mean that local authorities are dealing with an ever worsening financial squeeze. Many councils recognise the need to improve the quality of their finance function, offering new opportunities for finance professionals.
PwC’s latest annual Local State We’re In survey found that a mere 18% of councils are confident they can make the required financial savings over the next five years. “Dig below this and there are some fundamental changes underway that will transform the way local government finance departments operate and the capabilities they need,” says PwC partner Jonathan House.
“Firstly, while in the past much of the focus has been on cost reduction and managing expenditure, increasingly this will be balanced with a greater emphasis on income and leveraging the proceeds of growth. This means finance departments need to think creatively about how they can generate the income streams they need, both individually and in collaboration with other local authorities.
“Secondly, as councils are increasingly working with other public sector partners, for example across health and social care, finance teams need to develop knowledge of the different treatment of funds needed by new models of delivery and in some places new organisations.
“Thirdly, finance teams will have to carefully assess their appetite for risk as local government shifts to incentive-based funding and new flexibilities are introduced, with implications for their governance processes. The shift to business rate funding will fundamentally impact the way councils approach to financial management, while more flexibility, for example over the use of assets, also comes with new risks.”