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austerity

Extent of new cuts to councils' budgets becomes clear

Reports this week indicate that the Department for Communities and Local Government (DCLG) and three other arms of government have agreed a provisional deal to cut spending by an average of 30% over four years. What does this mean for UK councils?

Deepening austerity

The scale of the predicted cuts is unprecedented, and follows Chancellor George Osborne's controversial plans to cut tax credits. The Institute for Fiscal Studies says that areas likes transport and policing face day-to-day budget reductions of over 25% by the end of this parliament, or more than 50% since 2010.

Chancellor Osborne argues that the proposed measures will take control of government spending and guarantee economic security by bringing the budget into surplus by 2019-2020. In contrast, Labour’s shadow chancellor, John McDonnell suggests that Mr. Osborne is continuing on a path of “cutting investment to the lowest of any developed economy, and [delivering] the slowest economic recovery on record.”

Impact on local authorities

As things stand, the provisional DCLG agreement only applies to revenue spending and excludes the local government settlement. This is good news for councils, especially as the Local Government Association estimates cuts of this magnitude could cost councils £16.5bn by 2020.

Mr. Osborne says fiscal adjustments will require “further efficiencies” and closure of "low value programmes”, but local authorities must be wary of what this means in practice. Stephen Joseph of the Campaign for Better Transport highlights potential knock-on costs to councils that mightn't be obvious at first sight, such as “more potholes in local roads [and] more cuts in local bus services”.

If deepening austerity is extended to local government, budgets may be stretched to breaking point. A large proportion of council reserves are already allocated, and Cambridgeshire councillor Steve Count recently pointed out that existing cuts are “starting to hit at the front...that must inevitably include vulnerable people.”

Maintaining a steady cash flow will be essential to alleviate pressure on local authorities' budgets in coming years, and must involve effective debt recovery strategies. If you're a council worker who's concerned about how new cuts will impact your area, contact a Dukes Debt Advisor to discuss how our services could help.

Living on the edge: UK councils and financial failure

Local Government Association (LGA) chairman and Conservative peer Lord Porter recently caused alarm by suggesting that 12 to 14 UK councils could be nearing financial collapse. What is the current situation, and how close is the edge?

Counting the cost

The BBC has reported that Chancellor George Osborne is planning cuts amounting to around 25-40% of current council budgets. The LGA says that these reductions could leave local authorities £20bn worse off.

In response to criticism of shrinking council purses, the government has been quick to point out that local authorities have a reserve of £22bn that could absorb austerity shocks.

Safeguarding services

While righting the economy painlessly is a pleasant idea, council reserves are not the untouched bounty that Westminster suggests. A 2015 CIPFA (Chartered Institute of Public Finance and Accountancy) study found that 94% of council cash is already earmarked for future projects.

Several local authority representatives have raised concerns that community wellbeing is being affected by austerity: Cambridgeshire county council leader Steve Count says his council would be short of funds even if every local public library were to be closed.

Fighting for survival

The government hopes that cuts will force councils to be more innovative and efficient. While only time will tell if this is truly possible on a national scale, it does seem that several steps could be taken to safeguard services.

The Grant Thornton UK/Localis 'Making Devolution Work' report found that 95% of Local Enterprise Partnerships feel economic gains could be made through further devolution. George Osborne’s suggestion that local authorities may gain control of £26bn of business rates is also good news for struggling councils.

Improving payment systems to track cash flows and monitor debt could help to ease council budgets, as could switching to ethical Enforcement Agents like Dukes Bailiffs. Although recovering unpaid monies will not rectify the current situation overnight, sensitive debt collection may give local authorities enough breathing space to cope with further cuts.

If you work for a local authority and are concerned about future cash flows, contact Dukes Bailiffs to discuss how our services could reduce pressure on your budget.

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