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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.

Councils' use of Enforcement Agents to be debated by MPs

While we at Dukes Bailiffs specialise in ethical debt recovery, not all firms hold themselves to such high standards. Other companies' malpractice has tarnished the industry, and gave impetus to reforms that placed restrictions on Enforcement Agents' behaviour in 2014. Now Yvonne Fovargue, Labour MP for Makerfield, is proposing a bill that would further limit Enforcement Agents' conduct. Will the proposed changes have a positive effect?

What's on the cards?

If supported, Mrs. Fovargue's 'Regulation of Enforcement Agents (Collection of Council Tax Arrears) Bill' will lead to the establishment of an ombudsman position and turn existing 'good practice' guidelines on use of Enforcement Agents into legal requirements. At a time when uncollected council debts stand at at over £2bn, it's important that attempts to deal with rogue firms don't turn councils against ethical companies too.

If debt recovery outfits are acting responsibly and in line with 2014's interpretation of the 2007 'Tribunals, Courts and Enforcement Act', there should be no reason to fear the introduction of an ombudsman. What is concerning, however, is that Mrs. Forvargue is encouraging councils to avoid Enforcement Agents entirely. While we at Dukes Bailiffs support any changes that purge the industry of crude scare tactics, the suggestion that local authorities should look to establish "affordable repayment plans" instead of using Enforcement Agents utterly misrepresents our services.

A history of best practice

Our team of Debt Advisors and Enforcement Agents already use their expertise to produce affordable payment plans in conjunction with debtors and councils. We broke new ground by setting up a site dedicated to giving debtors money advice, and consistently go the extra mile to protect vulnerable individuals who've fallen into debt. This approach allows us to safeguard local authorities' reputations by making sure honest individuals aren't lumped in with deliberate non-payers.

We have a proven record of helping councils to maximise debt recovery, and pride ourselves on our transparent and competitive fee structure. New legislation should not deprive local authorities of ethical ways to boost dwindling budgets during austerity, and a distinction should be made between model Enforcement Agents and those who are lagging behind.

If you work for a local authority that's struggling to get by on austerity budgets, contact a Dukes Debt Advisor to find out how our services could help you today.

Will business rate devolution drive up council debt?

Devolution of UK government is once again in the media, this time in relation to the Conservatives' financial reforms. While decentralisation could eventually transform the entire political landscape, councils are currently preoccupied by Chancellor George Osborne’s announcement that local authorities will be given control over business rates. Observers disagree as to whether rate devolution offers a solution to shrinking council budgets – will the change increase revenue, or could councils see a rise in debt? 

Stimulating growth

Some commentators view the devolution of fiscal authority as a rare opportunity for councils to increase income in a time of austerity. Extra cash would in theory stem from local authorities being allowed to reduce rates and attract businesses – a higher number of firms paying a slightly lower rate should be more profitable than a few companies paying more.

Increasing debt

The prospect of business rate devolution has not, however, been welcomed unequivocally. This is mainly due to the fact that some councils could receive less cash from Whitehall under the new system, and may not be able to recoup the difference without raising rates and scaring off SMEs. Areas that are dependent on government support are less likely to have an existing business base, and the next round of devolution will force these localities to attract an initial cluster of flagship businesses in order to benefit from new powers. Financing plans such as these often requires increased borrowing, which could cause a spike in council debt with no certainty of return.

Potential impact

Some observers have also noted that giving councils greater responsibility for their finances may result in local authorities being treated as separate entities for credit assessment purposes. Though it's much too early to say, this could mean that councils’ credit ratings will no longer follow the UK’s sovereign rating – if a local authority receives a low credit score as a result of this 'decoupling', devolution would actually deter investment and make it difficult to find new creditors.

Dealing with uncertainty and future transformations to fiscal autonomy will be much easier if councils start from a baseline of secure cash flows and minimal debt write-off. If you work for a local authority and are concerned about what the future holds, contact a Dukes Debt Advisor to discuss how our ethical service could help.

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