13 Years of leaving Customers Better Equipped

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News & Updates

25/07/16
Alpine is celebrating its 11th anniversary of supporting the public sector and leaving its customers better equipped. Through our Workforce and Leadership Elevenses series, we offer up thought leadership and opinion pieces. This week’s is an overview of the LG financial settlement.

Enrich rather than impoverish our public services

Councils have been at the sharpest end of budget cuts since 2010 and have realised massive savings. Perhaps many thought these achievements would earn them some respite. Not so. From a local government perspective, the Chancellor’s recent announcement of the sector’s financial settlement heralds a bleak mid-winter.

As Jules Pipe, Mayor of Hackney has stated the cumulative effect of an average 10% year-on-year reduction since 2010 and the latest 1.8% cuts for 2015-16 is that councils now control less than 10% of government funding. Speak to any politician, manager or stakeholder of the sector and they will tell you that councils are at ‘breaking point’, ‘under extreme pressure’ and facing a financial precipice.

Only two years ago, the PWC annual CEX survey indicated a schism of opinion between council chief executives who were worried that the extent of the cuts would soon impact on the quality of services, and council leaders who felt there was still plenty of scope. That gap is now closing.

Local councillors are worried that the cuts are starting to be felt on the frontline – crucially in services residents prioritise, such as social care, waste management and street scene, and local libraries. Even lead councillors of traditionally Tory run tight-ship councils have voiced concern.

On average, shire councils will carry 0.6% of the reductions, with metropolitan and London boroughs experiencing 3.8% and 4.3% respectively. For many, this seems disproportionate. Yet the Government claims its 1.8% funding cut to local government is fair.

The sector begs to differ. CIPFA says this translates into 6% in real terms and criticises the inclusion of the Better Care Fund in the spending power calculation. The professional body for councils, the LGA, says it amounts to 8.8% in government grants, and leaving councils to find £2.6 billion worth of savings. For Councillor David Sparks, Chair of the LGA, this presents huge financial challenges for local public services.

Why should we care? Isn’t that their job? We need to care because youth unemployment is 20%; because adult social care accounts for a third (£1.9bn) of the total funding gap councils will face between now and 2016; because the NHS spends £1m an hour on diabetes; and because spent £11.1m in road user compensation for closed and unmaintained roads…

Aside from seeking efficiencies through shared services (which 337 already do) what action can councils take? Should they blow their reserves (once a sign of responsible long term financial management) on everyday delivery as the Secretary of State for LG has suggested?

Despite perceptions, the reality is that councils don’t have much financial autonomy. Should they want to raise council tax by 2% it will trigger a referendum; they cannot set their own business rates to best suit local needs; and despite it being at the top of the wish list of local businesses councils cannot retain 100% of business rates growth to reinvest in the local economy and workforce.

Fiscal devolution with more freedoms over tax revenues would definitely help. Equally removing the administrative obstacles and granting enhanced local decision making allows for greater efficacy over housing, transport, health and well-being and workforce. But it also requires bold local leadership – which is why the recent choice of Greater Manchester makes sense. It is cocktail of the right mind set and conditions for innovation that will give councils the confidence to find new and more cost effective ways of working, but the pre-requisite is the support of a government that has an ambitious and enriched vision for public services – rather than one that impoverishes them.

Ruby Dixon is Head of Local Government at Alpine. Contact her at: rdixon@alpine.eu.com

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