Scale of local government cuts took FDs by surprise

Author: Lucy Phillips, Public Finance   |  

The severity of local government cuts announced in the Comprehensive Spending Review came as a shock to half of council finance directors, while almost all have denounced the front-loading, a survey shows.
Think-tank Localis questioned more than a quarter of all council finance directors in England for the survey. It found that some 50% of the 91 respondents said the cuts in the October CSR were worse than they had expected while 80% believed the first year budget reductions were too steep. No finance director said the CSR announcement had been better than anticipated.

Local government faces a 26% real terms reduction in funding by 2014/15 as a result of measures announced by Chancellor George Osborne. The cuts are considerably front-loaded with a reduction of about 11% expected in the first year.

Almost three-quarters of councils now believe they will need to make compulsory redundancies, with more than a third of upper-tier authorities expecting to slash their workforce by more than 20% by 2015/16.

In many cases this will be in addition to merging services with other councils or outsourcing them to the private or voluntary sector or community organisations.

Despite an additional œ2bn of funding that was allocated to adult social care in the CSR, finance directors at upper-tier councils said this was the service likely to be hit most by the cuts.

Respondents also expressed frustration at the lack of clarity in Osborne’s announcement. One finance director was taken aback by ‘the lack of policy substance’ while another characterised the CSR as ‘smoke and mirrors’ for local government.

There was support among councils for the government’s shift towards removing ring-fenced grants but this was tempered by disappointment at the scope of the community budget pilots outlined in the CSR.

Community budgets, which pool departmental budgets at a local level, are to be set up in 16 areas initially and rolled out to all areas by 2013/14. Finance directors said the pilot scheme did not go far enough in giving councils greater freedoms to tackle social issues in radically new ways.

Localis chief executive Alex Thomson said: ‘Councils have to deliver better services for less money, and a salami-slicing, business as usual, approach will not suffice. Councils must think radically about how they support and empower their residents and introduce new service delivery models, with further support from government over initiatives such as community budgets.’

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