The UK Experience by Malcolm Morley*
Now the comprehensive spending review has been announced, we start to get a real feel for the financial challenges to be faced by councils.
An average 7.1 per cent cut in Revenue Support Grant for each of the next four years means that the details to be revealed over the coming weeks are going to be very important, with some councils likely to have to cut significantly more than 28 per cent over that period.
By any stretch of the imagination, this is a challenge that will change the face of Local Government and its whole operating model.
On top of this, revenue reduction will be the cost to change. Cutting jobs has a financial cost in terms of redundancy payments and pension strain payments, which will run into millions of pounds.
These costs will have to be met in addition to the savings required, which will mean that the 28 per cent average cut is not the full story.
Raising income is going to become even more important, although it is likely that there will be pressure to keep Council tax rises low. It is also the case that fees and charges, already low, will prove very difficult to increase to a level likely to make a significant impact on the cuts required.
As Baroness Eaton, Chair of the Local Government Association stated: “This spending review will hit councils and the residents they serve very hard and will inevitably lead to cuts at the front line. These are some of the biggest cuts in the public sector and we have to be honest about their impact.
“Town halls will now face extremely tough choices about which services they can keep on running. These cuts will cause real pain and anxiety for millions of people who use the services councils provide – from keeping children safe, to ensuring that streets are clean.”
In my last article I outlined the approach to budget building to address the savings necessary.
While the approach is still very relevant, the level of budget reductions revealed means that a more transformational approach is going to be required.
Radical reviews of service portfolios are now required, with councils likely to have to withdraw from many discretionary services built up over many years to meet local needs and political priorities.
The role of councils as individual organisational service providers will become increasingly limited. Achieving economies of scale through aggregating service volumes and purchasing power will have to be the order of the day. This will inevitably require a standardisation of service specifications.
This standardisation of services seems to counter giving individuals and communities the choice to be different and to reflect local needs and priorities.
The more standardised a service, the more likely it is that service providers reduce in number.
It also takes significant time to get agreement about specifications and to go to market. This may mean that more services have to be cut in the first two years to meet the savings targets.
Will councils merely become channels for their communities to access standardised services provided by fewer bigger providers?
The challenge for UK councils is much more than just financial.
*Malcolm Morley is Chief Executive of Harlow District Council and can be contacted via the Editor, email info@lgfocus.com.au
The views expressed in this article are not necessarily those of his employer.
