Local government being pushed close to the edge

By on 15/08/2013 in Leader, News, Service Reviews

The following is an open letter from Sir Albert Bore, Leader of Birmingham City Council, on a revised forecast of the authority’s finances, which show a poorer position that previously thought…

You will be aware, I'm sure, of the 'Jaws of Doom' phrase that I coined last year. This showed that, by the end of the period from April 2011 to March 2017, the council would have to find savings of £615m from its annual budget.

Cllr Sir Albert Bore

Cllr Sir Albert Bore

I have, on occasion, been accused of being too gloomy with this terminology. And I would love to say that I was wrong, that our figures were far too pessimistic, but I simply cannot.

Indeed, since then we have had a series of further announcements from central government and their impact can only be described as shocking and, in fact, far worse than we originally predicted.

The first of the announcements was the Chancellor's Budget in March this year which added a further one per cent to our huge savings target from 2014/15 onwards, crucially coupled with further reductions in later years due to other government services being protected at the expense of those provided by local councils.  All this added £77m pa to our “Jaws of Doom” by 2017/18.

This position worsened considerably when the government's Spending Round  decisions for 2015/16 were announced by the Chancellor on 26 June 2013.  The headline reduction for local government was said to be 10% in that year but it subsequently became clear that there were other changes that would further reduce our budget.  All of this added around a further £42m of savings pa by 2017/18, the full impact being felt from 2015/16.

Then, to add insult to injury, came what to many observers in local government was the final straw.  Without any prior warning or without any public statement being made by the Secretary of State or the Chancellor, the Department for Communities and Local Government issued what it called a “Technical Consultation” in the last week of July.  For the first time we saw council-specific figures and what we saw was that the reductions will be even greater than announced in the Spending Review. The upshot is that the true reduction in core government grants in 2015/16 will actually be 14.5%, rather than 10%, and we estimate that this will result in yet another worsening of around £23m pa in the funding gap.

When added together, the size and immediacy of these grant cuts is perhaps best illustrated by our updated 'Jaws of Doom' (see graph)

Jaws of Doom update Aug 13

This shows that by the end of the seven-year period to March 2018 we will need to have made savings of £825m pa.  Sadly, it seems that £615m pa was an optimistic figure, not a pessimistic one.

As I have said before, and I will say again, Birmingham City Council is a responsible local authority and we will do all we can to deliver against these figures.  However, to pretend that they can be delivered by traditional efficiencies and the sort of savings the Secretary of State for Communities and Local Government has highlighted is simply misleading. This council has not sought to delude itself or its citizens that these massive budget reductions can be achieved in this way. Accordingly, we are systematically and fundamentally reviewing all of our services, working with our partners and undertaking an extensive dialogue across the city.  We will protect key services wherever possible but it may be necessary to cease the provision of others altogether.

But of course the challenges ahead need creative, bold solutions.  Part of our approach is to persuade central government to channel more resources through the regions to be controlled locally. It is clear that our local policies on tackling unemployment work better than national ones and that the city and region can flourish if we are allowed to promote regeneration locally.

And there is no evidence that our policies are not bringing about results as evidenced by the figures released by UK Trade & Investment (UKTI) last month, which placed Greater Birmingham in the top three UK regions for attracting foreign investment. The number of new jobs created doubled in 2012/13 and foreign investment increased by 88 per cent.

I am today calling for the National Audit Office, which now has a remit to look after local government interests as well as national government interests, to examine central government's management of its funding to councils, and to assess the future viability of local government if these cuts go ahead.  Let us start turning the tables and ask the auditor to look closely at all of this!

Sir Albert Bore, Leader of Birmingham City Council

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