Most councils are coping well with current level of cuts but the future could be challenging, according to findings of a new Audit Commission report. It says well-managed councils are weathering the current economic storm far better than others. They claim:
“big expenditure cuts are always hard but auditors feel that well-managed councils can deliver their 2011-12 budgets. Facing big cuts is not, on its own, enough to worry auditors. It is councils with big cuts and weak management that are at higher risk of not achieving their budget. Good financial management is helping most councils cope in 2011-12.”
The report explains three ways councils can help plug the financial gap. They can either raise charges and/or council tax, dip into reserves or make reductions in spending.
Many families are struggling, making savings to household budgets and coping with increasing fuel and energy bills. That means raising council tax or charges is unacceptable. It’s a lazy option.
At the start of the 2011-12 financial year, councils held £11.8 billion in reserves. This was equivalent to 30 per cent of total revenue spending in 2010-11. According to the report single tier and county councils held unallocated reserves equivalent to two-thirds of their central government reduction in funds, and district councils around twice the value. If earmarked reserves are included in this figure then the picture is markedly different: district councils reserves are then six times the value of their cuts and single tier and county councils nearly three times.
But when it comes to using reserves, Sir Merrick Cockell, Chair of the Local Government Association makes a strong point: that councils should only consider dipping into their reserves in extreme measures and only for use in the immediate term.
The final way of making up the shortfall – cuts to spending – is something the Audit Commission says is essential. Once falls in income and reserves are taken into account there is a net gap of 7 per cent in total income available to fund services for single tier and county councils and 8 per cent for district councils. But those figures relate to existing services. Councils must consider the difficult but necessary options of scrapping services or departments that are not a priority, or can be performed by someone else.
Besides, the report states that there was no identifiable link between the extent of impact on services and the size of cuts. It is something that is more affected by local decision making and individual council priorities, meaning many councils’ excuses don’t stand up to scrutiny.
Much of this report confirms what the TPA has been claiming for some time – that spending cuts are achievable through good management and the willingness to make difficult decisions. Councils should look through our research archive for suggestions on what to cut. Harry Phibbs’ list of 100 ways to cut council tax without cutting key services also has some excellent suggestions.