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.