You don’t have to be the governor of the Bank of England to appreciate that the current financial crisis is the worst since the Great Depression of the 1930s.
Unemployment is heading ever upward, the economy is stagnating and the Retail Prices Index is at a 20-year high. Meanwhile, the eurozone limps from one disaster to another, undermining business confidence at home in the process.
With the government committed to Plan A, things can only get worse in the short to medium term. And, of course, it is the public sector that is bearing the heaviest burden.
For local government, in particular, this is proving a painful experience. Town and county halls have been searching for the Big Idea that will save millions of pounds and enable ambitious budgets to be met.
In reality, the Big Idea has been to do less. Eligibility criteria for care services have been toughened, libraries, Sure Start centres and youth clubs closed and road maintenance reduced.
The dog that didn’t bark, however, has been the expected explosion in outsourcing. Participants at a recent Public Finance round table debate agreed that councils were not turning to the private and voluntary sectors in the numbers predicted.
Outsourcing pioneers, such as Suffolk County Council and Birmingham City Council, have been forced into embarrassing U-turns, while the collapse of Southern Cross has highlighted the fact that privatisation does not come without risk.
The front-loading of local government budget cuts has also, paradoxically, shown up the limitations of outsourcing. Negotiating large contracts with the private sector takes time that councils do not have.
Round table participants discussed the potential savings from outsourcing, insourcing, employee-led mutuals, shared services, joint ventures, Community Budgets and combined chief executives. None, they suggested, offers the level of savings required in the time allowed.
So, what is to be done? As Sarah Phillips, the deputy director of the Centre for Public Service Partnerships, told round table attendees, the scale of local government’s financial challenge is unprecedented. And the squeeze will only get tighter as the demand for care services grows.
The fear is that town halls cannot make the savings without reducing services to an unacceptable or dangerous level.
It’s a frightening prospect, and one that is, no doubt, keeping many a council finance director awake at night.
