What can councils expect as budgets get even tighter in 2015-16? A lot more pain, but also opportunities to do things in a different way
It hasn’t been much of a party in local government finance since 2010, and it’s about to get a whole lot worse in 2015-2016. So what will happen then?
Is downsizing with hyper-efficiency the formula for survival? Computations that use this formula have a large number of variables. Tweaking these to find solutions for any particular authority produces an almost infinite number of political, social, legal and financial combinations.
Just how many of these turn out to be feasible remains to be seen. But there are several pointers. First, there should be an understanding that 'needs' must prioritised in a way that is accepted by the local community.
Second, there needs to be a recognition that local sovereignty (a fragmented system of decision-making) is an expensive luxury which, in reality, is no longer affordable either for policy or delivery.
Third and most importantly, we should accept that the purpose of local government is clearly redefined as the discharge of statutory functions, while the business of local government is how best to discharge those functions.
Downsizing will be shaped by hyper-efficiency. What will this look like in real life? A sharper focus on outcomes as well as a stranglehold on spend, some innovation - and a lot of compromises.
Consultations to identify spending priorities should already have taken place in local authorities. New consultations on alternative strategies are now required and will be painful. Nobody is suggesting that turning 'We can’t…' into 'We must… and we will…' is going to be easy. Publicising the difference between statutory and discretionary services might be a good place for everyone to start.
Strategic decision-making will increasingly move to regional centres. Governance, in the sense of communication upwards and downwards from street level, will become networked consultation, taking place mostly online. With a reasonable flow of information outward from the regional centre, and limited opportunities for comment from below, skilful communicators can keep various distant and dispersed elements feeling involved. For a power-hungry centre, the wind will be set fair for the opportunity to go unitary.
Shared services could morph from local (two or three councils acting together) to regional (up to 10 or exceptionally more councils acting together). Frontline service delivery decisions are scaled up with the all-important number of staff pyramids reduced, and the additional benefit of greater bulk-purchase discounts. Some deft HR manoeuvres will be needed to keep demoralised workforces from open rebellion.
With reduced budgets, service standards will fall, however ingeniously ameliorated by innovations in service delivery. How expectations of the fall are managed will become of key importance. For service areas with personalisation of budgets, this may turn out to be a neat way of passing the buck, in which service-user choice masks how support levels decline.
Spinouts will be accelerated, but expect an evolutionary process with survival of only the fittest. In shrinking market segments, where a key part of the spinout proposition is the aspiration to gain new customers (who are typically neighbouring authorities), this is a zero sum game. Early mover advantage may turn out to be very important. Business models which maximise volunteer participation will be a fact of life. For the rest, the devil take the hindmost.
The merits of sweating assets to maximise income need to be balanced against a much better understanding of social investment, and what the community dividend may be. A new definition of 'sustainable' is needed.
Finally another area, trading, requires access to capital and involves risks. If successful, its attractions are obvious. Opportunities to trade must be explored fully by local authorities, but with the awareness that trading is the means to an end, not the end itself.
Peter Hill, is a senior associate at Geldards LLP
