Floodgates open to next wave of cuts

June 3, 2010

After months of uncertainty before the election and a few days afterwards, we now have a very clear picture of what the new government will mean for local authorities and their partners.

Two days in May could go down in history as a time that defined the direction of the sector for a generation.

Chancellor George Osborne’s statement on spending sent a shockwave through every local authority finance director. It pointed towards even more drastic cuts to both the Department of Communities & Local Government budget and grant afforded to councils in the forthcoming spending review. A day later, the Queen’s Speech set out a bold Decentralisation and Localism Bill that promised radical reform.

Let’s consider the positives first. Many of the good ideas set out in the Conservatives’ Control Shift document have survived. A general power of competence should set councils free and prevent legal challenges such as the London Authorities Mutual Limited case. A promise of greater financial devolution hopefully marks the beginning of a more mature and honest debate over local government finance.

The economic development aspect of regional development agencies has been kept and should provide a key role for councils in developing their local economies.

The bad bits

Now for the bad bits. Despite a welcome move to remove ring-fencing from more local authority budgets, spending forecasts are unremittingly grim. Based on the proposals set out by the chancellor, the sector is looking at cuts of between 10-15% minimum, a figure quite unprecedented in recent times.

Despite the already sizable efficiency gains made by the sector over the past decade – figures that shame most Whitehall departments – the next wave of cuts loom like Dracula in a Hammer horror film. It is difficult to envisage how reductions of this size cannot hit frontline services.

Managing this process will be key. Extending Total Place to ensure value for money and improve partnership arrangements is more important than ever. NLGN’s forthcoming financial horizons research will outline approaches to how councils can adapt to a new era of service design and mitigate for substantial spending reductions.

We will be examining the future of workforce re-organisation in an era where increased productivity will become mandatory rather than aspirational.

The flood will take time to clean up, but at least there is now a clear policy direction from the government. Local authorities must rise to the challenge of making sure they don’t drown.

James Hulme is Head of Communications at New Local government Network


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