Councils face a decade of cuts due to zero and minus grant settlements, unless there is a radical shift in public funding allocation, leading experts have warned.
Stephen Hughes, chief executive of Birmingham City Council, told an MJ local powers conference his city received £7.2bn in public spending from various Whitehall departments. But he claimed better outcomes could be achieved by allocating from a single pot locally by need, rather than by structures.
He said: ‘If you were creating such a system, you wouldn’t start from here. The alternative, to go back to silos, means we’ll have a decade of cuts.’
The Leadership Centre last year, in its Calling Cumbria programme, examined whether the county’s £7bn of public money was being allocated efficiently under the current system.
London School of Economics director, Tony Travers, told The MJ conference, local government was ‘strangely isolated’ from the downturn because its budgets had been previously fixed in the CSR, and was centrally funded. Had councils relied on local income base, such as in the US, they would have been hit by the recession.
However, Mr Travers predicted ministers were likely to revisit budgets in 2010/11, the last year of the CSR, because low inflation had made the settlement for councils generous.
Thereafter, grant settlements were likely to be 0% and, in some cases, a minus figure. Overall, public spending would rise by 1%, with most of it devoted to health, education and welfare.
His forecast was backed by shadow local government spokesman, Bob Neill, who said funding cuts would be here for a decade and that ‘I might lose some of my local government friends’ if he became minister following a 2010 general election.
Two ways to improve local authority finances
The NAO has concluded insufficient action has been taken to address weaknesses in council finances. Teams from TLT LLP consider what councils should do next.
