The ancient Chinese curse wishes enemies to live in “interesting times”. Richard Harbord FCCA – chair of ACCA’s Public Sector Network Panel and interim CEO of Boston District Council – opened ACCA’s Local Government Summit by making clear he knows his Chinese curses. “This is an interesting time,” he said.
“Local authorities always cope with whatever is thrown at them,” continued Harbord. “But there is an air of crisis about the way financing is going and how the demand for services is growing. The crunch is going to be 2015/16.”
Those comments set the tone of the day. Since the 2010 Comprehensive Spending Review, councils have lost government grant of about 15% in cash terms, or 25% in real terms, according to Professor Tony Travers of the London School of Economics. A further 10% cut will hit in the 2014/15 year and there will be more to follow in subsequent years. “There will be austerity until at least 2020,” he explained. “This is unprecedented.”
The Summit’s opening speaker was Margaret Hodge MP, chair of the House of Commons Public Accounts Committee, who praised local government’s capacity to cope with this scale of cuts and yet still deliver services effectively. “Local government is where getting more for less is a reality,” she said. “There is collaboration across local authorities – if only we could achieve that in central government, between departments!”
The PAC goes wherever public money is spent, ensuring probity and value for money. But that has become more difficult because of the fragmentation of the public sector, for example with health foundation trusts, free schools and academies, and with the greater use of the private sector, said Hodge. The PAC cannot hold the private sector to account for its spending of public money, so it is dependent on whistleblowers. It is campaigning to improve accountability for the spending of all public money,
With the abolition of the Audit Commission, asserted Hodge, “the PAC and the NAO are the only show in town – it’s an undoable job.” Hodge is concerned that the PAC does not have enough resources to do everything that is expected of it. This is especially true as it will now examine local government much more closely.
Michael Burton, editor of the Municipal Journal, told the Summit: “It is quite remarkable that local authorities have managed the cuts so well. The big question is whether they can continue to do this.” Welfare reform will hit local government budgets when councils are coping with further grant cuts for 2014/15. “After the next election, government will look much more closely at management costs in the NHS,” he predicted.
Hugh Grover, chief executive of London Councils, told the Summit there is a big shift taking place towards a reliance on business rates retention. This new funding regime will hit hardest those councils that are most grant-dependent. Grover presented the Summit with the notorious Graph of Doom, demonstrating the scale of councils’ progressive revenue loss. “We are a long way from the bottom of the slope,” he warned.
“Something dramatic has to happen,” stressed Grover. “Local government will still be here in 2020 and beyond, but it will be very different from what we have today.” Given the lack of flexibility in some of the largest spending commitments – adult social care, child protection and waste management – other services will be badly hit. Previous cuts have been heavy in services that might be regarded as pro-growth, particularly planning and development, but also housing.
Christine Gilbert, interim CEO of Brent Council and former chief inspector at Ofsted, told the conference that local government had to recognise the scale of the financial challenge, but to recognise that substantial change was possible. “As senior officials, we are obliged to be optimistic: to provide leadership of change,” she said.
That change contained several key elements, Gilbert explained. Councils must act to reduce demand for services. Services need to be co-designed and co-provided with citizens, with individuals and the voluntary and community sector more engaged with their councils. “Top down governance is no longer going to work,” she said.
Councils are going to have to be more flexible in their operations and they are their partners, such as the NHS, must work more flexibly together. “From 2015/16 on we won’t be able to do the things as we have been doing things,” she stressed.
To deal with the scale of reform required to deal with the massive cuts in revenue, councils need to invest in support units that improve their capacity to change, believes Gilbert. She expressed disappointed that many such units are instead closing as part of the cuts. Brent has so far had to cope with a loss of £100m in grant support, it loses a further £20m in 2014/15, £33.6m for 2015/16 and £19.2m in 2016/17.
Coping with this scale of financial squeeze places financial management and senior accountants very firmly in the centre of local government decision-making, said Gilbert. “The key issue for accountants is to understand the business and to know where the service is going to go,” she added.
Dermot Joyce, CEO of outsourcing contractor Liberata, stressed how the effective use of data can enable authorities to improve performance management. “You can’t make operational decisions without data, otherwise you are busking it,” he said. But to enable this to happen there must be common data reference standards across the public sector, which at present there are not.
Former Home Secretary David Blunkett gave the closing address in which he recalled his period as leader of Sheffield City Council during the last period of intense financial pressure on local authorities, when ratecapping was imposed in the 1980’s – the same period as the miners’ strike. “Lessons have been learnt [from that experience] that local authorities can’t take on the Government and win,” Blunkett told the audience.
Blunkett left the summit with a further warning: although the financial pressure in the 1980s seemed at the time immense, “We are in a much worse position now.”