Local Governments Response To The Cuts
Author: Tom Simpson, Localis |
Localis has produced a report based on a survey of a quarter of finance heads in local councils on the local government settlement. Most agree cuts are steep – the co-author discusses the survey results in detail.
So the wait is now over. Grants to English councils will fall by approximately 10% next year. For those councils that feared cuts of up to 20%, new ‘banded floors’ have been introduced as an extra dampening mechanism. The level of uncertainty about the scale of cuts for individual councils has undoubtedly kept finance directors very busy in recent weeks, planning for every possible eventuality.
Thankfully, a quarter of them found the time to fill in our recent survey, which formed the basis of our report Facing the Future. The survey revealed that almost every council was expecting a near average settlement at around 28% over four years. Half of all respondents thought that this was too steep, and four in five thought that the funding cuts were too steep in the first year.
The scale of cuts is forcing councils to make some very difficult decisions. For example, councils do not believe that they can achieve the necessary staff cuts through natural wastage, with more than three in four respondents believing that forced redundancies will be necessary, and one in three of upper tier councils projecting staff cuts in excess of 20% by 2015/16.
On public services, upper-tier councils predict that adult social care is the service most likely to be severely affected by funding cuts, despite the announcement of additional funding streams worth £2bn by central government. Almost every council will be cutting back a range of non-statutory services too, from libraries to weekly bin collections.
With many services, councils will have to deliver better services for less money, and a salami-slicing, business as usual approach will not suffice. Our survey showed that councils are willing to consider innovative solutions about how to protect front-line services, with nearly three-quarters of Finance Directors saying they are thinking of merging services with other councils, or considering outsourcing service delivery to the private sector (71%), voluntary sector (69%) or community organisations (63%).
The big opportunity for local government came this week from the Localism Bill. The Bill represents a massive leap forward in the Government’s plan to transfer power away from the centre to councils and beyond, to communities. For local authorities, the creation of a General Power of Competence is a truly seismic change, reversing the presumption that local government can only be trusted to do the things that Whitehall allows – instead allowing them to do anything and everything except those things that are specifically prohibited.
But the big winners from the Bill will be you and me. Giving communities the ability to shape the development of their surroundings is a fantastically exciting step forward for people power, particularly when backed up with the new Community Right to Build, Community Right to Buy and Community Budgets.
Interestingly, our survey showed that there was widespread disappointment that the Community Budget pilots did not go further, highlighting the fact that they offer the potential to genuinely reform local services. This will only be true, however, if they can encompass more services, involve more local people, and be rolled out to more areas as quickly as possible. The removal of ring-fencing too was widely supported, with two-thirds of councils believing that it would act as a tool to make cuts, whilst protecting front-line services.
The Localism Bill has therefore offered councils some of the freedoms they need to tackle the enormous challenge of cutting the deficit. But going forward, there is an even more radical opportunity for local government. The recent Local Growth white paper outlined the Government’s intentions to review business rates next year. Our current project ‘Can Councils Live Without the Formula Grant’ is exploring how, through the re-localisation of business rates, all local councils can be given a huge incentive to grow their economic base and take control over the levers of local funding, including in the most deprived areas of the country.
It is vitally important in the current climate that we give local areas the opportunity to take control of their own destiny, and to provide the right tools to councils and local communities to ensure that every area has an equal opportunity to improve. The system of equalization has failed the very people it was meant to help, and we must now move to a system that helps those areas deal directly with the issues that they face.