Local government experts and finance chiefs have warned the Treasury’s tough efficiency targets will heavily impact on councils.

Councils, advisers and business have been cautious towards the chancellor’s bid to stave off recession.

Public finance chiefs have said the spending commitments were political considerations but admitted they would have a key role in trying to meet the tough efficiency targets set by the Treasury. 

Steve Freer, chief executive of the Chartered Institute of Public Finance and Accountancy (CIPFA), urged caution.

He said: ‘The size and scale of public spending increases are matters for the politicians – CIPFA’s concern is that extra money is invested wisely and in a manner which is sustainable for the long term. It is critically important that the disciplines of good financial management are firmly to the fore.

‘The planning of schemes and initiatives to help stimulate the economy can be expedited but it must not be compromised. Decision making must be as rigorous and robust as possible with proper regard not only for upfront capital costs but also for downstream revenue implications'

John Tizard, director of the centre for public private partnerships at the university of Birmingham advised; ‘The PBR statement in the context of the economic recession and global financial situation must mean that local authorities and their partners focus on leadership of place.

‘Local strategic partnerships must be deepened in areas such as regeneration, shared services; shared management and strategic commissioning. Efficiency targets and fewer resources accompanied by more demand for services will test the quality of partnership; this is the time for genuine resource sharing and not cost shunting; for agencies to use their resources collectively for the collective good.’

Councils raised concerns over what would happen when the Government looks at how to pay back its extra borrowing.

Harrow LBC leader Cllr David Ashton said: "Our real worry is that Government funding for local authorities will prove a tempting target when the Treasury starts working out how it will claw back the cost of today's tax giveaway.

‘Despite the fact that our funding settlement will be down to 1.5% for 2010, there is a real risk that ministers will simply further trim budgets. In Harrow - just one North London - suburb - we have already been loaded with extra costs of £3m due to the credit crunch, and that picture will be replicated up and down the country. The upshot of today will be that shoppers may buy now, but councils will pay later.’

The response from the private sector was equally muted.

Alan Downey, head of public services of KPMG in the UK, said: ‘The party is finally over.

‘The immediate consequence of today’s announcements for the public sector is that an additional £5bn pounds of savings have to be found in 2010–11. For many years after that, public sector expenditure will increase at an annual rate of 1.2% which is substantially below the forecast rate of increase in GDP.

‘It is not clear yet where these cuts will fall but it is safe to presume that local government, work & pensions, revenue & customs and the foreign office will be heavily affected.’

But the Chancellor won praise the British Retail Consortium for the attempt to stimulate consumer spending with tax cuts.
 
BRC director general Stephen Robertson said: ‘Businesses require certainty. Shops will cope, but implementing a new VAT rate in just a week will be exceptionally difficult for customers and retailers at their busiest time of year.

‘Because retailers use a lot of property, business rates have a profound impact on retailers’ viability.
 
“The Chancellor should have reduced next April’s excessive business rates increase and postponed the 2010 revaluation. These substantial new burdens can only increase the pressure on fragile businesses and push up prices.’
 
He attacked the reform on the empty property tax.

‘The Chancellor is right to accept this tax has failed in its objectives but this goes nowhere near far enough. Relief should be restored to businesses of all sizes suffering from this ill-conceived policy.’