Council funding cut by 27%
Local government / 21 October 2010
The spending review aims to cut £81bn from the budget in the next four years. Helen Mayson finds out what it means for local government managers
While the comprehensive spending review on 20 October may have provided little in the way of surprises after a series of press leaks and photographed reports, the cuts themselves are still going to have a huge effect on public sector services. Public departments have been left reeling with an average of 19% slashed from their budgets over the four year period, and around 490,000 public sector workers are expected to lose their jobs.
Chancellor George Osborne suggested that with a turnover rate of 8%, most of the required reduction in headcount would be achieved by natural attrition – though he admitted there would be some redundancies.
The local government budget is set to reduce by over £7bn in the next four years, equating to around 30% in cuts to capital expenditure and a 27% reduction in cash to local councils. Osborne announced a 7.1% reduction in local government funding each year until 2014 and said ring-fenced grants would be scrapped and absorbed into a single revenue grant.
The new settlement for local government will also see an extra £2bn for social care over the four year period, Osborne said.
This is a big leadership challenge for councillors in particular, to get the most out of local authorities, pull together other local services, and get the community involved in making tough choices.
Andy Sawford, Chief executive, Local Government Information Unit (LGiU)
Andy Sawford, chief executive of the Local Government Information Unit (LGiU), called the cuts to local government budgets “huge and unprecedented”, suggesting that they would change the way councils worked completely.
“Many people in local government will feel gloomy because of the impact on services, communities and jobs,” he said, “But tomorrow we have to roll up our sleeves and work out how we are going to do the best in incredibly challenging circumstances. This is a big leadership challenge for councillors in particular, to get the most out of local authorities, pull together other local services, and get the community involved in making tough choices, and in developing new local voluntary and community effort and enterprise.”
Silver lining
NHS and education budgets emerged from the review largely unscathed, with spending in these areas set to grow by 0.1% and 0.4% respectively. Ringfencing does not mean they are exempt from efficiency savings, however, with NHS managers tasked with identifying £20bn in savings over the next four years.
There are some positives for local government too. While funding will be cut by 27%, if the sector includes current Council Tax revenue assumptions, total real-terms reductions to all local government expenditure is expected to be around 14% over the period.
Osborne also announced that the government would implement a “massive devolution of financial control” to local authorities. In a letter sent to all heads of local authorities on 20 October, Secretary of State for Communities and Local Government Eric Pickles said that the review provided “significant new powers” for local government. Replacing Regional Development Agencies with local enterprise partnerships, abolishing the Audit Commission and scrapping 4,700 Whitehall targets represented an “unprecedented shift in power”, he said.
“I have every confidence that, with these new powers, councils who tackle the issues head on will be able to meet the expectations of local residents by protecting frontline services, hardworking families and the most vulnerable,” he said.
Making changes
Dr Anton Franckeisss, practice director at ASK Europe, said managers needed to focus on repairing the damage from announcements in the spending review and remodeling the future.
“What’s needed is a flexible and responsive process for managing change,” he said. “Ironically, given the apparent insistence of the Chancellor that there is ‘no plan B’, it is a change management model that is most likely to assist public sector managers in refocusing and equipping their organisations for the months to come.”