By Richard Johnstone in Manchester | 2 October 2013
The chair of the Local Government Association has warned that Chancellor George Osborne’s plan to achieve a surplus in the public finances by the end of the next Parliament could be ‘very bad’ for council funding.
Speaking at a Localis fringe event at the Conservative party conference in Manchester, Sir Merrick Cockell said it was not yet clear how the plan to run a surplus in the public finances by 2020 would work.
A surplus could be arrived at by one of two ways, he added – either by government planning for the public finances to go into the black following spending reductions, or through growth in the economy increasing revenues.
‘I’m sure we’ll hear more about it, whether that meant [to] plan your budget to go into surplus, or there being a surplus because of improvements in the economy. That may actually mean different things,’ he told delegates.
‘If it means a planned surplus, then the message is very bad for us, because we are a significant part of public expenditure and we are going to have to save even more, not just to balance the budget but to place in that surplus.'
He warned that councils would not be able to make those savings wholly through greater efficiencies or sharing services and senior officers.
'I know, frankly, about those, and it’s very difficult to do. It takes to five years to get real savings.’
Cockell called for local government to have a ‘grown-up’ relationship with Whitehall in the next Parliament. This should include the sector being given a full financial settlement for the five-year term, he said, instead of ‘one that is told to us a few days before Christmas and that we have to implement a few days later’.
Also speaking at the event, which was hosted by the Localis think-tank, cities minister Greg Clark said it was possible such a long-term funding agreement could be reached.
Clark, who is also financial secretary to the Treasury, highlighted that the City Deal agreed with Manchester in March 2012 included a rebate from the increase in national taxation that comes as a result of local construction schemes. This ‘earnback’ lasts for a period of 15 years.
‘I think the essence of a deal is there’s something in it for both sides, and it is usually possible to find that we can do deals that create more value, to the advantage of both parties to the transaction,’ he added. ‘I’m sure that’s possible.’
