Scanning Financial Horizons: Modelling the consequences of fiscal consolidation for local delivery

Kindly supported by Vertex.

Vertex

The recession has had a number of immediate consequences, but the delayed ramifications for public expenditure are likely to be felt severely once the current Spending Review period ends. Even on published projections, spending levels beyond health, education and international development are likely to fall significantly. Having enjoyed a decade where public spending rose from 36% of GDP to 43%, the banking crisis and consequent recession are placing significant
strains on the public purse. With tax increases unlikely, public spending for the next two Spending Review periods will be seriously constrained.

But what will be the real world consequences of this spending constraint for local services? Is it realistic for “efficiencies” to absorb all the savings required? If some services are to be cut, which are most and least likely to fall under the knife? Will social services, or leisure and recreation services, or environmental services take
the brunt of reductions?

In this project we will attempt to quantify the scope for improving productivity and generating more effective mechanisms to deliver existing services at lower costs. However, we will also scope out future scenarios and the consequences for local government services as difficult trade-offs are made between competing priorities. We intend to create a model to predict the likely impact on frontline services for a range of revenue and capital budget scenarios, flowing from the choices that future Chancellors of the Exchequer might make in respect of grant settlements, in particular:

  • We will showcase private sector and local authority case studies and gather expert opinion to map the potential efficiencies that councils could realistically deliver within a range of timescales
  • The research will develop a series of local government spending forecasts. These will be based on projections for the public sector as a whole and consideration of likely scenarios of how central government funding will fall between Whitehall departments
  • From the spending forecasts that are developed, and taking into accountthe realistic efficiency saving projections identified, NLGN will assess the likelyimpact that different spending scenarios have on future delivery of services. This modelling will be grounded in on-site simulation exercises with a representative sample of councils, involving senior staff such as Chief Executives, Finance Directors and Departmental Heads

For further information contact Nick Hope.


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