The Audit Commission's warning about the financial pressure on councils came as no surprise. Drastic changes are likely, with knock-on effects on local democracy
One in ten councils are at risk of busting their budgets. That's the stark conclusion of an Audit Commission report this week. Scaremongering? Hardly. We are already seeing this starting to happen.
Last week, a leaked Local Government Association assessment of West Somerset Council declared it ‘not viable as unit of local democracy and governance’. Meanwhile, Birmingham leader Sir Albert Bore has argued that budgetary pressures mean the ‘end of local government as we know it’. His council faces a hole in its finances of £757m as a result of equal pay judgments. Interest payments alone on this bill will be crippling if they are allowed to capitalise it. If not, it's not clear what plan B is.
These are not isolated examples: the commission estimates that a third of unitaries and county councils could be at medium-term risk of being unable to balance their budgets.
None of this is any surprise to people in and around the sector. We know that councils face a vicious cycle of shrinking resources and rising demand, notably but not exclusively, in adult social care.
In the long term these pressures can be met only by reducing demand. Just as we have seen councils move over the past two decades from delivering to commissioning, so we will see the emphasis shift from commissioning to building capability and resilience in individuals and communities so that they draw less on services.
But this sort of transformation is a long-term project and it relies on a degree of interoperability across public sector budgets that remains a long way off, though Community Budgets and City Deals are a step in the right direction.
In the short to medium term then, we should expect to see more and more councils becoming financially unsustainable. This is likely to mean massive redundancies across the sector (a probability flagged up recently by Newcastle leader Nick Forbes), cuts to services and mergers between councils to create larger, more financially resilient, bodies.
This raises an important question about local democracy. There's a real risk that local representation gets lost in the creation of these larger new units of service delivery. The LGA report on West Somerset declares it as unviable as a unit of local democracy, but it's vital that we separate councils' financial and democratic viability.
In lean times it's more important than ever that people are represented effectively, so that their concerns and priorities are heard, so that they are engaged in the taking of tough decisions and so that we can draw on their creativity and innovation in solving the social challenges we face.
If this really is the end of the world as we know it for some councils, local councillors will need to find a way to engage with and advocate for their communities in a rapidly changing, uncertain environment. They will need to find a way to make sure that local politics are not swept away by central government or regional intervention. A tough task, but we must hope that our elected representatives are up to it.
Jonathan Carr-West is director of the Local Government Information Unit
