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This article was written by Jonathan Carr-West, Director of LGiU, and was first published by Public Finance on December 5th 2012. The original article is available here.
The chancellor gave local government a slight breathing space on funding cuts in his Autumn Statement. But there are very few reasons to celebrate.
No turning back – and help for hard working families – were the chancellor’s predominant themes in his Autumn Statement today. Although, despite his bullish ‘Plan A’ political rhetoric, some may have detected a whiff of Keynesianism in the extra £5bn announced for capital infrastructure development.
For local government it’s a mixed picture. There will be some relief at being exempted from the 1% reduction in departmental expenditure next year. But while this may seem like an early Christmas present, it’s unlikely to be enough to ensure a happy new year.
With the realisation of council tax benefit localisation, reforms to the Early Intervention Grant, changes to the social fund and the grim prospect of a poor implementation of universal credit, councils will already be starting the next budget round with a worrying list of known unknowns.
And on top of this we have the expectation of a 2% reduction in the following year and a tough new funding settlement to come. Given that in the last month we’ve already seen a council declared financially unviable for the first time since 1907 and the Audit Commission warning that one in ten councils are at ongoing risk of being unable to balance their budgets, it’s hard to imagine that further cuts won’t see more councils effectively becoming insolvent.
There are important positives however. The government’s support for aspects of Lord Heseltine’s local growth review is to be welcomed; particularly the creation of a single funding pot for growth related spending and the devolution of this funding down to local level. Additional funding or capacity building within LEPs is also encouraging. We must hope that the process of bidding for this money does not present too many bureaucratic hurdles.
It’s also interesting to note that as part of their commitment to local growth the government promises support to local authorities ‘who wish to create a combined authority or implement other forms of collaboration’, reflecting perhaps a recognition of the financial risk that many local authorities will now be operating under.
A more joined up approach to spending on growth and local infrastructure is a step in the right direction and should enable local authorities to more fully realise the potential of a community budgeting approach.
The challenge will be that they are in a race against time to use the breathing space created by the exemption from next year’s departmental spending cuts to effect a radical transformation of public services, and to bring citizens with them on that journey, ahead of further cuts kicking in from 2014.
It’s a tall order and for many the Ghost of Christmas Future will loom large. They may well feel that George Osborne is still playing (unreformed) Scrooge to their Tiny Tim.