Member Article

Local authorities left with no room for manoeuvre

The National Audit Office (NAO) say local authorities are facing increasing difficulty in absorbing central government funding reductions without cutting services.

In a report the spending watchdog recommends the Department for Communities and Local Government work with other departments to improve the evaluation of the impact of decisions on local authority finances and services.

In 2010, central government planned to reduce local authority funding by £7.6bn in real terms between April 2011 and March 2015.

The NAO estimate that local authorities are planning £4.6bn of savings by April 2013, and still need to find around half of the savings to reach the March 2015 target.

Chair of the Committee of Public Accounts, Margaret Hodge, commented: “Local authorities face deep cuts between now and 2015. Many have rationed services, such as adult social care and libraries, and local auditors found an estimated 9 per cent of authorities suffered “high financial stress” in 2011-12.

“I am alarmed to hear that 12 per cent are now at risk of being unable to balance their books in the future, according to local auditors, with potentially disastrous consequences. The Government’s initial plan to cut authorities’ central government funding by 26 per cent over the four years to 2015 has been loaded with additional cuts of £445 million for 2014-15. Council tax receipts are now expected to be lower and inflation higher than the Government initially thought, further tightening the squeeze. T

“This is set against a rising tide of demand for services such as adult social care and children’s services. Authorities will have to search harder and wider for future savings, as quick-win cost reductions have already been harvested from services representing a small proportion of their overall spending. This will need to be done without closing the door to people who rely on these services in their communities, particularly the most vulnerable.

“I find it extraordinary that the Government has failed to publish a revised figure for the total reduction of local authority income over the spending review period. The Government’s lack of transparency leaves individual authorities and the public in the dark about the true extent of the cuts that still await their communities. This report estimates that the £4.6 billion savings expected to be achieved by authorities by April 2013 are likely to represent just half of the total required.

“As the cuts kick in, the Department needs to make clear what it will do if multiple authorities fail financially. In addition, my committee will expect the Department to provide us with a clear statement on the financial impact of the Government’s changes to authorities’ funding and income and what this might mean for local services.”

In the report, the NAO suggest scope for absorbing cost pressures through reducing other, lower cost services is diminishing as these services have already been substantially reduced.

Questions around the accountability framework for addressing widespread financial failure in local government were also raised.

Amyas Morse, head of the National Audit Office, said today: “Local authorities are facing the challenge of reducing spending while protecting the services they provide. So far, they have generally coped well, but central government funding support will continue to reduce and the impact on individual local authorities will vary.

“The Department will need to be able to detect emerging problems and respond flexibly and quickly.”

This was posted in Bdaily's Members' News section by Tom Keighley .