The news was all about Rochester and Dan the flag man last week, so the National Audit Office report on local government finances didn’t get much of a look in. There was a bit in the Guardian and Russia Today found the space to report that half of UK councils face financial collapse but otherwise, the empty noise of the culture wars dominated the headlines.
The NAO’s report explains how much local government funding had been cut and where the cuts have landed. As I found out when I wrote something about this a year ago, there isn’t much information available. One of the NAO’s findings was that, while the government may be cutting public service spending, it has no idea what services are being stopped or run down because it has contracted most of the cutting out to local authorities and isn’t keeping track of what they are doing.
As you might expect, the picture is bleak. The NAO reckons that, by next year, council funding will have fallen by an average of 37 percent in real terms since 2010-11. For metropolitan districts, that rises to 41 percent. Of course, the population has risen since then, so the per capita amount will be larger still.
In response, councils have cut spending on services. These two charts show where the axe has fallen. It’s useful to look at them both together. Figure 10 shows the percentage reduction for each service area. Figure 11 shows the share of the cuts.
Planning and development has seen the largest percentage cuts to its budget. In most local authorities, though, planning is a fairly small department so its share of the total cuts has been relatively small. Adult social care has provided most of the savings but because it accounted for a lot of spending in the first place, the percentage cut isn’t as great.
One of the first things to jump out of these charts is that, while everything else has been cut, spending on children’s social care has been increased. It’s not difficult to see why. A child’s death will bring forth tabloid outrage. The same newspapers that demand cuts and the sacking of useless council bureaucrats start shouting ‘something must be done’ and ‘never again’ as soon as a child is killed.
Many of the other services cut are those that many people don’t see or ones where the impact will not be seen for some time. Unless you have an elderly, disabled or vulnerable relative, you probably wouldn’t notice cuts to social care. Spending reductions in planning won’t come to light until someone (probably another austerity cheerleading tabloid) notices the proliferation of nightclubs and betting shops in a given area, or asks why so many houses have been built on a flood plain. Likewise, the effects of halving spending on traffic management and building control may not be seen for years.
What about efficiency savings, you might say. Well so far, local authorities seem to have done quite well. For example, environmental health inspections have fallen by 26 percent. Given that spending has fallen by 33 percent, that’s an efficiency saving.
It was a similar story in social care. The NAO notes:
- In the 2 years before 2010-11, local authorities saw little real-terms change in the total cost of these services. This was the net outcome of local authorities providing fewer services, which cost them more.
- This changed significantly in the 2 years after 2010-11, where local authorities saw large savings in these service areas. These savings resulted in local authorities providing fewer services, which also cost them less to provide.
- This pattern ended in 2013-14, with savings from these activities limited and delivered entirely through reductions in activity, rather than price.
More efficient public services aren’t necessarily better ones. Doing a bit less for a lot less makes a service more efficient, though it might not look that way to the service users.
But efficiency can only go so far, as the example above shows. Furthermore, the problem with big cuts to small departments is that you soon reach a point where if you cut them any more you might as well stop doing the activity altogether. For example, regulatory activities like building control and environmental health are only any use if there is a reasonable amount of enforcement. Chop them too much and you might as well not bother.
Even though most local authorities have done a good job in managing spending cuts, the NAO found that an increasing number of councils are having to make unplanned cuts or use of reserves part way through a financial year. As David Walker said last week, local authorities cannot go into deficit like NHS trusts. They have to balance their budgets. Unforseen expenses can leave them short. They then have no choice but to dip into reserves or, if they don’t have any, to save money by cutting something else.
Local authorities, say the NAO, expect things to get a lot more difficult after 2016. Local auditors doubt that councils have the capacity to maintain the pace of spending cuts achieved over the last four years. If the next government pushes ahead with the fiscal plans set out by the current one, the cuts will be much steeper in the next parliament. This is likely to cause severe problems for councils.
Many auditors referred to local authorities with substantial unfilled ‘funding gaps’ for 2015-16 and beyond. Auditors are generally positive about local authorities’ financial management and take confidence from their authorities’ track record in delivering savings. They are, however, clearly concerned that some authorities have been unable to identify ways of making anticipated savings for 2015-16 and beyond.
Where authorities have identified ways of making savings over the medium term, these often involve substantially redesigning and transforming services. These initiatives are required for local authorities to continue to make savings, but are also inherently risky. Auditors identified the long timescales required, the complications of setting up partnerships for activities such as shared services, the difficulties of introducing new job roles and ways of working, and uncertainty as to whether savings will materialise as planned and on schedule.
All of which suggests that, when it comes to savings, most the low hanging fruit in local government has been picked. Another £48 billion of cuts in the next parliament could finish some council services off.
Local authority cuts in the next parliament will have to come in the areas which affect a lot more people and some of them may come very suddenly. It would only take some unexpected expenditure, caused, for example, by something like last year’s floods, for some councils to run out of money. To balance the books they could then be forced to simply shut some services down.
At the Resolution Foundations Parliament of Pain event yesterday (of which more later), Giles Wilkes said that Conservative plans for the next five years would lead to “the absent-minded destruction of the state”. That is a succinct summary of the outlook for local government. After 2016, pressure on councils will become severe. As they start to run out of cash, the cuts are likely to be piecemeal, random and uneven. We will amble in a bemused daze towards the shrunken state of the future.
By 2017-18, we will have less than £7m to spend on everything the city council does, above and beyond adult and children’s social care.
Thanks to Paul Anders for the link.