The scale of council cuts is exacerbated by their front-loading. Alison Scott sees a tension between the need for urgency and promoting localism
The implications of the numbers in the Comprehensive Spending Review are becoming clear, especially within local government, which is faced with some of the largest reductions in funding. The CSR set out a real-terms reduction of 28% in local government funding, compared with overall cuts of 19% across all departmental budgets.
In addition, there were other negative impacts for local government in the details of the CSR. Examples include the demise of the Working Neighbourhoods Fund and the decision to add a 1% premium on Public Works Loan Board rates. The latter would add £44m to local authority annual borrowing costs if borrowing in 2011/12 were at the same level as in 2009/10 – itself unlikely, as capital resources were cut by 45%.
The required cuts are at the top end of what local authorities were planning for. What is a greater problem is that the cuts are heavily front-loaded, as the table below illustrates.
Local authority
core funding
Year from CLG Reduction
2010/11 £28.5bn
2011/12 £26.1bn –£2.4bn
2012/13 £24.4bn –£1.7bn
2013/14 £24.2bn –£0.2bn
2014/15 £22.9bn –£1.3bn
This will be a particular issue as authorities struggle to balance their budgets over the medium term.
Cuts of this size cannot be easily implemented over a short timescale. Local authorities have to comply with statutory consultation when making certain changes in services. Moreover, cutting 140,000 jobs, the figure estimated by the Local Government Association, cannot be done overnight.
Local authorities will have to manage the biggest budget shortfalls they have faced for years, within a short timescale.
This is further exacerbated by the fact that individual councils will have to wait for the provisional local government settlement to finalise budget decisions that will have far-reaching consequences for many years to come.
The settlement not only informs councils about how much general grant they will receive from central government, but also the fate and allocations of specific grants.
Councils will effectively have two months to finalise these decisions after the provisional settlement. The impact of the front-loading and short timescales on long-term value for money should not be underestimated.
At a recent summit, chief financial officers identified a number of strategies to help make savings:
- vision – authorities were clear on the role of medium- and long-term planning and the need to develop a clear vision of what the organisation and its services will look like when funding is expected to restabilise;
- maximising value – authorities are seeking to maintain a focus on the significant resources at their disposal rather than on the funding reductions at the margin. The challenge is to provide as much value as possible from the resources available;
- efficiency – authorities have a good track record of making year-on-year savings. It is essential that this work is continued and accelerated to minimise cuts to frontline services;
- joined-up budgets – pooling and sharing resources across public bodies can lead to more efficient and effective services.
To be successful, strong leadership is needed, with officers and elected members working closely together. At the same time, authorities must maintain effective finance functions and the general managers responsible for frontline service budgets should develop greater financial awareness.
They must also be realistic about the scale and volume of changes they attempt to make in response to reduced funding.
All this cannot be achieved without effective planning and, in many cases, fundamental changes to the way services are provided. There is a real risk that the scale of the reductions required in such a short timescale will put pressure on the foundations of effective public financial management.
To achieve real localism, authorities are increasing their efforts to involve local people and communities in decision-making about needs and priorities, design and planning of services, allocation of scarce resources and cuts.
There is a clear tension between time devoted to real local consultation and the need to make immediate budget savings. While many authorities will already be well into public consultation processes, the level and timing of the cuts mean that far more difficult decisions than anticipated are now likely. Local authorities will need to ensure that localism is not the first casualty of the cuts.
Alison Scott is assistant director, local government, at CIPFA
