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Cutting council spending to support other departments a ‘false economy’

Cutting local government spending further would be a false economy, the Local Government Association (LGA) has warned in their submission to Wednesday’s budget.

The LGA said that councils have faced real terms cuts of 40% in the last Parliament, and that increasing pressures on their budgets combined with the risk of the government announcing further cuts to safeguard other departments mean that their financial situation is worsening.

They said that government proposals to allow councils to generate more revenue, including devolving asset sales and business rates and allowing a council tax increase, will only partly compensate for the cuts.

Lord Porter, LGA chairman, said: “Councils have more than played their part in trying to balance the nation's books in recent years and all councils will have to continue to find substantial savings from local services to plug funding gaps over the next four years. Extra council tax powers and transitional funding will help some but won't be enough to completely offset the full impact of funding pressures.

“Giving councils the option to fix longer-term funding settlements has been an important step and rightly recognised by government as being essential to give councils the financial certainty they need to protect local services. It would be perverse to then undermine this with further cuts handed down just one month later.

“Cutting local government to prop up other departments is a false economy. The government should carefully consider the effect council funding cuts have on other parts of the public sector and whether to tear down the ring-fence around health and education spending.”

He added that local government social care was vital for reducing pressures on the NHS.

The LGA estimates that costs facing councils include an increasing population and demand for specialist services (£3.6bn by 2019-20),  the end of contracting out state pension arrangements (£797m each year), the introduction of the National Living Wage (£919m by 2019-20), the widening scope of Deprivation of Liberty Safeguards (£172m each year), NHS trusts seeking a backdated business rates discount (£1.5bn), the introduction of the Apprenticeship Levy (up to £200m) and the road repairs backlog (£12bn).

The most recent State of Local Government Finance survey found that 89% of councils will have to increase charging in 2016-17, 82% will have to dip into their reserves and nearly 40% will have to cut frontline services.

 The LGA called for increased devolution, especially around areas such as housing, employment schemes and flooding defences, to allow councils more freedom to provide value for money services.

They also said councils should be more involved in the consultation on business rates devolution, following an appearance by local government finance leaders before MPs last week in which they expressed doubt about the scheme.

As additional saving measures, they suggest integrating health and social care and modernising the system of delivering statutory notices to the public.

Chancellor George Osborne said in an interview on BBC’s Andrew Marr Show yesterday that the government will have to make further cuts of 50p for every £100 spent by 2020 because of an unpredictable global economy.

However, he added: “I think we can find those savings. It’s not a huge amount in the scheme of things. We are providing more support to disabled people and, yes, we back working people.”

PSE will have full coverage of the Budget as it is announced on Wednesday.

(Image c. Press Association)


Tim Brooks   14/03/2016 at 12:51

There is scope for providing local government services more effectively and efficiently (and therefore reduce costs.) However focusing on cost cutting is the wrong way. If council services were redesigned based on value to service users - to be more effective - then there is huge scope for service improvement that will reduce costs. But, simply making arbitrary cuts will result in the worsening of services as key value creating activity will be hit - leading to higher costs overall (maybe transferred to Health, Education, Policing.) It requires study and the development of an understanding of how these services work (sub-optimally in most cases) and redesigning them based on value to customers. There is much waste in public services, but the current cost-cutting model does not differentiate between waste and value - as a result cuts get made in high value services. We need intelligent redesign not mindless salami slicing.

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