The recession means councils will have to work much harder to meet efficiency targets, help with the consequences of unemployment, and maintain frontline services. Mark Conrad reports, in the aftermath of the Budget
The worst public finances since the Second World War. That’s what the UK faces, as its local leaders strive to reinvigorate their recession-hit communities.
As the chancellor, Alistair Darling, made painfully clear when he delivered his ‘bad news Budget’ on 22 April, there was no scope for a second fiscal stimulus that would allow Labour to spend its way out of the recession through hefty investment in services.
Instead, local government must scour the ashes of Britain’s blitzed businesses and frazzled finances to somehow deliver lower-cost services to protect jobs, re-skill a devastated workforce, and kick-start moribund local economies.
As the recession grips the UK – and unemployment soars above two million – the cash required to protect vulnerable communities has dried up even faster than the Treasury predicted in the pre-Budget report, just four months ago.
Public borrowing is now estimated to reach £175bn – or 12.4% of national income – this year. Consequently, town halls have been handed little new cash, and will have to work harder – and smarter – to help residents emerge unscathed.
In fairness to the Treasury, however, it continues to acknowledge that local authorities and their partners are best placed to deal with challenges posed by the downturn.
As some estimates for future unemployment levels have reached three million, Mr Darling has again turned to local authorities to manage new employment initiatives.
He announced new funding for councils and their partners to create up to 150,000 jobs and 50,000 traineeships in the – currently under-staffed – care sector.
As The MJ went to press, the Government had still to clarify how much cash would be available to councils to oversee the programme. Meanwhile, the Local Government Association said it would ‘work to ensure that councils have genuine control to spend the money in the interest of local people’.
Sir Jeremy Beecham, leader of the LGA’s Labour group, claimed in the context of a tight spending environment, that Mr Darling’s employment promise was ‘bold’.
‘We are facing tough times, and demands on scarce resources are real, but it is absolutely right that job creation has been recognised as the absolute priority for people who need the most help, to the benefit of local economies everywhere,’ Sir Jeremy said.
‘The benefits of this plan are twofold.
Not only will individuals have the jobs they need, spreading benefits to families, communities and local economies, but they will be working in local services helping vulnerable people, making neighbourhoods cleaner and safer.’
Local capital spending on housing is an effective way to stimulate the economy, and Mr Darling has also made £1bn of new cash available to the housing sector. This includes £100m to support new, environmentally-friendly council homes.
The cash will drip-feed development during a public spending drought, and could help to protect 30,000 construction and housing-related jobs. But LGA analysis suggests the council pot is ‘only enough money to build 1,000 to 2,000 homes over the next two years’ – three to four homes per local authority.
David Orr, chief executive of the National Housing Federation, expressed dismay at the settlement: ‘We are in the midst of major economic and housing crises and the chancellor should simply have backed our call to spend £6.35bn of public money on helping housing associations deliver 100,000 new social homes over the next two years.’
A senior local government source went further: ‘For a government which initially tackled the recession with head-on Keynesianism, the minimal funding for housing smacks of a missed opportunity to inject vital capital investment.’
Instead, the big beneficiaries of the 21st century’s return to Keynesianism have been the banks which Mr Darling acted swiftly to save before Britain officially entered a recession, when the Treasury had financial ‘wriggle room’.
With public borrowing now sky-high, the real opportunity for other sectors to benefit has seemingly passed.
Instead, what Mr Darling has also provided to councils is a greater degree of autonomy to manage scarce resources. As expected, the chancellor announced the UK’s first two city-regions – although there was surprise within local government over the inclusion of Leeds, alongside Greater Manchester, as a pilot area.
Until two weeks ago, local government experts predicted that Tees Valley would join Manchester in the first wave of city-regions, allowing the Government to pilot different models of sub-regional governance – one based around a core city, another around a group of equally-influential local authorities.
But as Whitehall’s doubts about the viability of the Tees Valley bid intensified, ministers instead turned to a second core city structure, likely to provide for a more successful experiment.
Now, 10 local authorities in Greater Manchester and 11 around Leeds – including North Yorkshire CC – will gain significant new powers over cross-border spending and programmes for housing, regeneration, skills and innovation.
While council chiefs on Teesside lamented a missed opportunity, Cllr Andrew Carter, chair of the Leeds City Region leaders board, said the chancellor’s decision had boosted the chances of a swift economic recovery in Yorkshire. It means, he said, the 11 local authorities and their partners ‘can support local businesses and economies more effectively, and achieve economic recovery more quickly than would otherwise be possible’.
The LGA and Centre for Cities think-tank, meanwhile, called on ministers to expedite plans to expand the number of city-regions. With two ‘core’ city experiments under way, the likes of Birmingham – which is trialling ‘Total place’ spending to make all local public sector spending more effective – Newcastle and Liverpool will observe with interest.
With local government spending likely to feel the pinch when the current spending review period ends – Mr Darling confirmed that the current three-year grant settlement would remain in place – it will be essential that the sector frees-up as many of its own resources for frontline services as possible.
This will be partially achieved through another hefty demand for efficiency savings – including an extra £600m target for local government which takes town halls’ requirement for the current spending review period to £5.5bn.
The £600m will be handed to councils to reinvest in services but, beyond 2011, Mr Darling has said a Labour Government would also require public bodies to contribute a further £9bn of annual savings within three years.
Publication of the Treasury’s Operational efficiency programme (OEP) on 21 April revealed this would necessitate further savings in IT and back-office functions; asset management; property; and procurement.
The fifth pillar of the OEP, Sir Michael Bichard’s ‘local innovation and empowerment’ strand, will also place new demands on local public bodies – including councils – to co-ordinate their spending more effectively to avoid duplication and to draw on the expertise of frontline staff to deliver improvements.
The detail of Sir Michael’s plan is explored elsewhere in The MJ this week, but initial reaction has been muted, because the precise demands on town halls have not been published.
Steve Beet, local government leader at PricewaterhouseCoopers, has warned the combination of funding pressures could create a ‘perfect storm’ across town halls by 2012/13.
But a senior CLG source retorted that without a breakdown of the efficiency requirements for councils beyond 2011 – and bearing in mind that the next three-year finance settlement had not been published – such warnings amounted to ‘low level scaremongering’.
As Mr Darling’s incredible borrowing predictions indicate, the chancellor has delayed unpopular decisions about major tax increases – which would claw back much-needed cash for the exchequer – until after next year’s general election.
However, the surprise tax increase – the introduction of a 50% tax band for people earning more than £150,000 a year – will hit senior local authority personnel just as the row over council salaries was beginning to abate.
So, there we have it. Amid the worst public finances announced since the war, Andy Sawford, chief executive of the Local Government Information Unit, said Mr Darling’s announcement last week was also ‘the most significant Budget since 1945’.
‘It will shape the environment in which councils operate for the next decade, and it will be years before we can judge the impact,’ Mr Sawford said.
These are challenging times for town halls.
Let’s hope there is enough cash in the coffers so that we can make informed and rational judgments about the effectiveness of the sector’s hard-won autonomy...
As the chancellor, Alistair Darling, made painfully clear when he delivered his ‘bad news Budget’ on 22 April, there was no scope for a second fiscal stimulus that would allow Labour to spend its way out of the recession through hefty investment in services.
Instead, local government must scour the ashes of Britain’s blitzed businesses and frazzled finances to somehow deliver lower-cost services to protect jobs, re-skill a devastated workforce, and kick-start moribund local economies.
As the recession grips the UK – and unemployment soars above two million – the cash required to protect vulnerable communities has dried up even faster than the Treasury predicted in the pre-Budget report, just four months ago.
Public borrowing is now estimated to reach £175bn – or 12.4% of national income – this year. Consequently, town halls have been handed little new cash, and will have to work harder – and smarter – to help residents emerge unscathed.
In fairness to the Treasury, however, it continues to acknowledge that local authorities and their partners are best placed to deal with challenges posed by the downturn.
As some estimates for future unemployment levels have reached three million, Mr Darling has again turned to local authorities to manage new employment initiatives.
He announced new funding for councils and their partners to create up to 150,000 jobs and 50,000 traineeships in the – currently under-staffed – care sector.
As The MJ went to press, the Government had still to clarify how much cash would be available to councils to oversee the programme. Meanwhile, the Local Government Association said it would ‘work to ensure that councils have genuine control to spend the money in the interest of local people’.
Sir Jeremy Beecham, leader of the LGA’s Labour group, claimed in the context of a tight spending environment, that Mr Darling’s employment promise was ‘bold’.
‘We are facing tough times, and demands on scarce resources are real, but it is absolutely right that job creation has been recognised as the absolute priority for people who need the most help, to the benefit of local economies everywhere,’ Sir Jeremy said.
‘The benefits of this plan are twofold.
Not only will individuals have the jobs they need, spreading benefits to families, communities and local economies, but they will be working in local services helping vulnerable people, making neighbourhoods cleaner and safer.’
Local capital spending on housing is an effective way to stimulate the economy, and Mr Darling has also made £1bn of new cash available to the housing sector. This includes £100m to support new, environmentally-friendly council homes.
The cash will drip-feed development during a public spending drought, and could help to protect 30,000 construction and housing-related jobs. But LGA analysis suggests the council pot is ‘only enough money to build 1,000 to 2,000 homes over the next two years’ – three to four homes per local authority.
David Orr, chief executive of the National Housing Federation, expressed dismay at the settlement: ‘We are in the midst of major economic and housing crises and the chancellor should simply have backed our call to spend £6.35bn of public money on helping housing associations deliver 100,000 new social homes over the next two years.’
A senior local government source went further: ‘For a government which initially tackled the recession with head-on Keynesianism, the minimal funding for housing smacks of a missed opportunity to inject vital capital investment.’
Instead, the big beneficiaries of the 21st century’s return to Keynesianism have been the banks which Mr Darling acted swiftly to save before Britain officially entered a recession, when the Treasury had financial ‘wriggle room’.
With public borrowing now sky-high, the real opportunity for other sectors to benefit has seemingly passed.
Instead, what Mr Darling has also provided to councils is a greater degree of autonomy to manage scarce resources. As expected, the chancellor announced the UK’s first two city-regions – although there was surprise within local government over the inclusion of Leeds, alongside Greater Manchester, as a pilot area.
Until two weeks ago, local government experts predicted that Tees Valley would join Manchester in the first wave of city-regions, allowing the Government to pilot different models of sub-regional governance – one based around a core city, another around a group of equally-influential local authorities.
But as Whitehall’s doubts about the viability of the Tees Valley bid intensified, ministers instead turned to a second core city structure, likely to provide for a more successful experiment.
Now, 10 local authorities in Greater Manchester and 11 around Leeds – including North Yorkshire CC – will gain significant new powers over cross-border spending and programmes for housing, regeneration, skills and innovation.
While council chiefs on Teesside lamented a missed opportunity, Cllr Andrew Carter, chair of the Leeds City Region leaders board, said the chancellor’s decision had boosted the chances of a swift economic recovery in Yorkshire. It means, he said, the 11 local authorities and their partners ‘can support local businesses and economies more effectively, and achieve economic recovery more quickly than would otherwise be possible’.
The LGA and Centre for Cities think-tank, meanwhile, called on ministers to expedite plans to expand the number of city-regions. With two ‘core’ city experiments under way, the likes of Birmingham – which is trialling ‘Total place’ spending to make all local public sector spending more effective – Newcastle and Liverpool will observe with interest.
With local government spending likely to feel the pinch when the current spending review period ends – Mr Darling confirmed that the current three-year grant settlement would remain in place – it will be essential that the sector frees-up as many of its own resources for frontline services as possible.
This will be partially achieved through another hefty demand for efficiency savings – including an extra £600m target for local government which takes town halls’ requirement for the current spending review period to £5.5bn.
The £600m will be handed to councils to reinvest in services but, beyond 2011, Mr Darling has said a Labour Government would also require public bodies to contribute a further £9bn of annual savings within three years.
Publication of the Treasury’s Operational efficiency programme (OEP) on 21 April revealed this would necessitate further savings in IT and back-office functions; asset management; property; and procurement.
The fifth pillar of the OEP, Sir Michael Bichard’s ‘local innovation and empowerment’ strand, will also place new demands on local public bodies – including councils – to co-ordinate their spending more effectively to avoid duplication and to draw on the expertise of frontline staff to deliver improvements.
The detail of Sir Michael’s plan is explored elsewhere in The MJ this week, but initial reaction has been muted, because the precise demands on town halls have not been published.
Steve Beet, local government leader at PricewaterhouseCoopers, has warned the combination of funding pressures could create a ‘perfect storm’ across town halls by 2012/13.
But a senior CLG source retorted that without a breakdown of the efficiency requirements for councils beyond 2011 – and bearing in mind that the next three-year finance settlement had not been published – such warnings amounted to ‘low level scaremongering’.
As Mr Darling’s incredible borrowing predictions indicate, the chancellor has delayed unpopular decisions about major tax increases – which would claw back much-needed cash for the exchequer – until after next year’s general election.
However, the surprise tax increase – the introduction of a 50% tax band for people earning more than £150,000 a year – will hit senior local authority personnel just as the row over council salaries was beginning to abate.
So, there we have it. Amid the worst public finances announced since the war, Andy Sawford, chief executive of the Local Government Information Unit, said Mr Darling’s announcement last week was also ‘the most significant Budget since 1945’.
‘It will shape the environment in which councils operate for the next decade, and it will be years before we can judge the impact,’ Mr Sawford said.
These are challenging times for town halls.
Let’s hope there is enough cash in the coffers so that we can make informed and rational judgments about the effectiveness of the sector’s hard-won autonomy...
