Double Take: Economics Editor Ben Chu argues why the government needs to end austerity
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Last week’s NHS funding windfall ticked all the right boxes – irrespective of how ultimately it will be financed – but another part of the public sector could be forgiven for feeling neglected when the prime minister made her big announcement.
After eight years of austerity, 2018 was the year when the dire straits facing local government hit the headlines.
Northamptonshire county council acted as a prominent case study for the sector’s financial issues, and only last week Torbay council announced that it was fast running out of money.
But despite extensive publicity, No 10 and the Treasury so far remain largely unmoved.
Only this week, the chief secretary to the Treasury, Liz Truss, warned her colleagues off any pre-emptive spending review pleas for cash.
But the evidence for the new housing and local government secretary, James Brokenshire, to make a case for a relaxing of the Treasury purse-strings for councils is becoming overwhelming. The consequences of further inaction are becoming starker by the day.
New research this week by the County Councils Network (CCN) shows that England’s largest, mainly Conservative-led, councils face a combined funding pressure of £3.2bn over the next two years; due to projected demand for services, inflation, and government cuts.
Even more worryingly, our research reveals that faced with these funding pressures, council leaders’ confidence in delivering balanced budgets – a legal requirement of councils – is dramatically falling.
Without a cash injection over the next two years, just one-third of respondents are confident of balancing their books in 2020.
Clearly, any scenario that sees a council unable to balance its budget in 2020 may seem a long way off, but it does not paint a reassuring picture for local councils nor bode well for the future of local services
In the short term, what does this all mean for local residents?
Essentially, the worst is yet to come in reductions to local services if county authorities are to balance their books over the next two years with no additional help from government.
The £3.2bn funding black hole will be filled, but substantial cutbacks will have to be made to residents’ local services.
With county authorities seeing their core government support grant reduced by 92 per cent by 2020, the room for manoeuvre is becoming increasingly small for our councils.
Having made savings in back-office, less visible, or non-essential services, our member councils tell us that they will have little choice but to now cut frontline services substantially.
Last month, our research pointed out that due to unavoidable reductions in home to school travel, some 20,000 less pupils receive free travel to local schools.
This week’s budget survey shows more of this is on the way, with at least £466m in savings being made to frontline areas – think adult social care, children’s social services, pothole filling, and bus services.
At the same time, they will have to introduce new charges for services, or significantly raise council tax to make up the shortfall.
This situation, in a microcosm, has been played out this week in East Sussex.
The county council’s cabinet approved a significant package of cuts, including closing a number of day centres for the elderly and disabled, a reduction in support for those in community housing, and for the disabled, and the closure of two household waste recycling sites.
A large proportion of those cutbacks will be in preventative services that reduce long-term demand; a false economy which will have long-term consequences.
The council’s Conservative leader said he was left with little choice – the council’s grant funding will reduce by £17m by 2021, but demographic and inflationary pressures add up to a total cost burden of £65m.
This isn’t unnecessary whinging or councils crying wolf, but illustrative of what is likely to come if the situation doesn’t change.
Our members are united and clear: to avoid these consequences they need an immediate injection of money before the government’s spending review, and then a sustainable four-year settlement as part of the review.
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Government cannot use financial mismanagement as an excuse; we are talking about highly-regarded and well performing councils, with public satisfaction holding up – for now.
These councils have got their heads down and delivered what has been asked of them (and more) during austerity, but they now say the well is truly running dry.
While Liz Truss may not want ministers to make the case for extra cash now, a strong but considered voice round the cabinet table for local government – in the form of James Brokenshire – is desperately needed.
Counties want to work with government in a proactive, and constructive way; supporting the new communities secretary in his case to the Treasury for more resources for councils. Otherwise, we might see drastic changes to our local services over the next few years.
Simon Edwards is director of the County Councils Network
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