Andrew Jepp 27 March 2015

Councils and cuts: The changes so far and the challenges ahead

It is certainly promising that Osborne pledged to take Britain from ‘austerity to prosperity’ last week. Many were no doubt bolstered by the Office of Budget Responsibility (OBR) confirming an increased growth forecast of 2.5%, up from 2.4% in December.

However, despite the green shoots of economic growth, the financial outlook remains much the same for local authorities across the country. As has been the case for the past five years, local government has been left fighting over crumbs while others eat the cake.

It is no doubt true that, so far, councils have remained remarkably resilient to the challenges they face, innovating and improving efficiency to not only ensure the delivery of core services but to modernise as well.

Indeed, councils should be applauded for the adoption of pioneering initiatives, which have allowed them to make substantial frontline savings in the face of ongoing funding cuts.

However, this response has not been plain sailing, and it is important to note the sea-change in council action that has taken place over the past year. While local authorities have greeted the austerity challenge with creativity and grand ambitions since the funding cuts were first introduced in 2010, 2014 was no doubt the year in which talk turned decisively into more stringent action, the need to review frontline services and to transform to survive and thrive.

As revealed by our report last year, The Transformers, councils are now more innovative than at any time since World War Two. Indeed, what has been particularly exciting over the last two years is that progressive action amongst our councils is now evident across the board. The ‘transformers’ are now shaking up society with radical actions taking them far beyond ‘blue skies’ thinking.

Increasingly, our councils are becoming more fiscally and commercially minded, looking for new ways to make up for the funding shortfall. For example, some councils are now renting out office space or building hotels and others are finding economies of scale through joint service delivery and outsourcing.

Such initiatives are not the anomalies either, most councils are now training staff and updating their systems to streamline their operations and create efficiencies. Their ambitions are not insignificant. Overwhelmingly, local authorities are working on the assumption of ‘zero’ grants in the coming years.

Importantly, council chiefs should feel reassured that, despite this transition, Britons have not yet noticed any decline in standard in the delivery of council services. As our research has shown, almost two thirds of Britons (64%) feel that core services such as refuse collection, street cleaning, education and social care have remained unchanged despite 97% of councils having introduced major operational changes in response to budget pressures.

However, this trend may soon change as the economy grows and strengthens. Following the chancellor’s announcement last week, Britons may well expect to see a change for the better in the public services they use. Overcoming this perception gap, between expectations and service provision, is set to be a huge challenge for local authority leaders.

Equally, council chiefs cannot ignore the corollary effects of the funding cuts, and the resulting changes, on workforce morale. Maintaining new initiatives will require long-term support through high-quality and skilled talent as well as adequate infrastructure. Council leaders must therefore ensure that they do not neglect their staff as these operational changes take force. Creating the foundations for long-lasting change requires an engaged public sector workforce and it’s this that will ensure councils can manage long-term risk and deliver more resilient local services in the years to come, as the funding cuts continue to take their toll.

Andrew Jepp is public sector director at Zurich Municipal.

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