Capacity counts


By Victoria Barnard, Consultant, CIPFA Advisory Services 

England’s councils are under pressure like never before. But all pressures are not created equal. Though it is difficult to form a coherent picture of the relative impacts of austerity on the various strata of local government, one statement does ring true: capacity to cope with change is now more essential than ever, and not all councils have the same capacity. District councils in particular, with broad responsibilities but perhaps the fewest resources, are feeling the pain.

District councils’ funding has been hit hard in recent years; the Audit Commission’s Tough Times 2013 report estimated that income from government to districts decreased by 21.7% in real terms from 2010/2011 to 2013/2014. Service spending in the same period decreased by 16.6%, indicating that authorities have already been facing difficult decisions about how to make savings. Furthermore, while most districts were confident of delivering their budgets for 2012/2013, around 40% had decreased reserves, a warning sign for long term viability.

And the end is not in sight yet. Many surveys now reveal that council leaders and senior officers are extremely worried about what’s to come in 2015/2016 and beyond. George Osborne’s announcements in last year’s Autumn Statement and this year’s Budget confirm further cuts, and with both coalition and Labour politicians now openly committed to future budget surpluses, further difficult decisions must be made by all councils. When giving evidence to the Public Accounts Committee on the impact of local government cuts, however, Professor Tony Travers said that "smaller authorities are likely to be more exposed as we go ahead".

The coalition’s new approaches to business rates, council tax, welfare and planning fall more heavily on districts than their county neighbours and just the introduction of these significant new initiatives alone would normally stretch a finance team’s capacity. With the need to further reduce expenditure and deal with increasing demand in areas such as housing as well, district council finance teams have a lot on their plate. But it has to be done, and it has to be done right; the consequences of making bad decisions in many of these areas are substantial. However, the Audit Commission report found that in their responses to austerity so far, districts were using fewer money-saving strategies than other authorities. This may reflect a lack of resources to consider or implement other options; it may be due to denial about the size of savings needed in the short or long term; or it may reflect a lack of confidence in delivering change. Whatever the reason, it seems likely to indicate missed opportunities.

All councils, now planning their 2015/2016 and beyond budgets, need to pause to survey the landscape. What is most vital is to learn from each other: to understand what has worked elsewhere and what hasn’t, what’s possible and what’s not, what’s going to have a significant impact and what isn’t. Collectively, the sector knows what it’s doing; the challenge is for each individual council to transform that knowledge into what will work for them.