Essex sees demand reduction as key to savings

19 Jun 15
Essex County Council has set out a three-year “invest to save” plan in order to ensure it can continue to provide public services while also balancing its budget.

Speaking to Public Finance as the authority published its out-turn report for 2014/15, cabinet member for finance John Spence said reducing demand was key to ensuring the long-term sustainability of the authority.

Since taking up the finance brief last September, Spence said he had focused on schemes that could cut spending – called “invest to maintain”, “invest to grow” and “invest to save” – in response to government funding reductions.

“You need to invest if you’re going to be able to keep savings,” he said. “Ultimately, you can cut the flesh, but there comes a point when you start cutting the bone. You therefore need to find ways to do things differently in terms of investing to save for the future.”

The “invest to maintain” programme is part of a move to longer-term repairs of roads, which is intended to make some savings as well as improving connectivity. The “invest to grow” plan is focused on housing to boost council tax revenue, while the “invest to save” section is focused on early intervention programmes.

This includes action to reduce the number of children going into care. Spence highlighted that, as an early indication of the work, the council now had the second lowest proportion of children in care per 1,000 of the population. Other projects include investing in independent living schemes for older people and those with learning disabilities, so demand can be reduced for residential care.

“It is investing in ways that still allow you to deliver the service while at the same time reducing your revenue costs, or avoiding the increase that will come from what we all understand is a demographic timebomb,” he said.

The county’s out-turn report showed a £270m capital investment programme in 2015/16, its largest ever, as it embraced the range of projects “in a major way” through to 2019/20.

“Unless we do this over the next three years onwards, our ability to balance your books will become ever harder to the point of becoming impossible,” Spence warned.

“Not only do you have the government funding reductions but you have the growing demand of the number of older people. So we’ve got those savings built in now.”

Spence added that this planning included making allocations within budget decisions for debt servicing in the short term as part of this programme, which will include raising money through the Public Works Loan Board.

“What you’ve got to do is say if your revenue budget gap for 2016/17 is, let’s say £50m, you actually need to add another several million onto that for every hundred million that you want to invest. So we don’t just focus on what is the revenue budget gap, we’re actually focused on what would the revenue gap be if you added in the borrowing and repayment costs of capital.

“If you’re going to invest more, you’ve got to borrow more, therefore you’ve got a bigger revenue gap that you have to cover now. But you won’t get the gain without the pain.”

Spence also called for councils to gain more from economic development, including full business rate retention, to take the authorities “out of the situation where we fall prey to whatever a government department decides to do”.

He acknowledged that devolution was “an easier thing to do where you have a single source of economic gravity”, such as a city, but it was down to the government to find models of how devolution can happen everywhere.

“I think it is very much in government’s interest to bear witness to what a county like Essex is trying to do and to facilitate that rather than merely to stand back and watch.

“I applaud the direction of travel of the government and encourage them to work with us to create an effective model for counties which don’t have a single dominant city.”

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