Bowler Local Government Officer says tough decisions will be needed to achieve radical Council Tax cuts and cope with a tightening central government settlement. He gives some options below.

Hard times are coming for the public finances. Depending on your view of macroeconomics, a bigger public sector deficit may be the right policy for the next year or so – but even if it is, early in the life of the next Parliament the economy will not need as much stimulation, the debt will have to be repaid, and renewed inflation may need to be brought under control. Unless economic growth returns both more quickly and more virulently than expected, the next Government will be looking to save significant amounts of money just to keep taxes at around their current level, let alone if it aspires to reduce them as I believe most readers of ConservativeHome hope and expect.

While I hope to be wrong from a self-interested perspective, and because I value the services we provide very highly, I suspect that local government is likely to be a prime candidate for delivering those spending reductions. This is both because when it has been asked to do so in the past it has a track record of success, and also because cutting funding to local Councils enables national politicians to shift the blame for the resulting service reductions. "Cutting council funding" also strikes less fear into voters than "cutting health funding" or "cutting school funding".

Becoming more efficient will remain important, but if we pretend that all, or even most, of the required savings can be achieved simply by doing the same things, but with less money, we are deluding ourselves. Many of the big gains from outsourcing and smarter procurement have already been made – local government leads the public sector in this respect – and real cuts will be necessary to save real money.

With that in mind, I have been considering where the axe could fall. Some savings could be achieved by Councils acting alone, provided they were released from a number of relatively arbitrary targets which might be affected by them. Many will need permission from central Government, or Parliamentary legislation. My hope is that by planning ahead, we will be able to manage the spending reductions not without controversy, but as part of a grown-up conversation about what the state can afford, rather than a disorderly fight between central and local government in which local people are largely ignored. I hope for example that different savings will be more or less prominent in different areas, as local priorities differ – I am an outspoken defender of the "postcode lottery", as long as the lottery ticket is a ballot paper, not a chequebook.

1) Spend less on construction. There was undoubtedly a backlog of capital activity in public buildings a decade ago, for example many schools needed extensive repairs. There is, however, much less logic to the Government's ambition that almost every school in the country should be rebuilt or remodelled. Many are entirely fit for purpose, and what money is available would be better spent on teachers and books. My teaching friends would argue that the core problem is, in any case, behaviour, and much could be accomplished at little cost by empowering teachers to reinstate discipline in the classroom, whatever the vintage of its construction.

Similarly, no Councillor will be unaware that residents are angry at the number of potholes in many areas. We may nonetheless either have to accept that we have the roads we can afford, or else stop building new roads and bypasses in favour of repairing the existing network. Alternatively, while it may be heresy to many, we could charge for the use of new, necessary, low-congestion roads so that they pay for themselves. While I am arguing on my blog that state-led construction (of houses, particularly) in the short term would be a sensible measure during the recession, those need to be turned from cost centres into profit centres early on in the recovery, with many rented out or sold at the market rate, not at a large discount. With government borrowing currently cheap, and private sector credit frozen, there may also be an opportunity to ‘buy out’ some expensive PFI contracts, reducing their cashflow costs.

The approach to the separation of revenue and capital budgets should be revised so that there is no longer an incentive to spend a great deal of capital when the same could be accomplished with a much smaller amount of revenue – long-term investment is often sensible, but it should be undertaken on its own merits, not because of artificial regulations around budgets.

2) Spend less on democracy. The costs of democracy have risen over recent years, by and large delivering good results, but it is open to question whether similar, or better, results could be delivered without as much spending. Much of the growth in communications budgets over recent years is not more "PR" as many people think, it is a massive increase in levels of public consultation (as well as websites and new media costs). Could some of the work of scrutiny committees be clerked by an elected members, rather than a dedicated officer, making them both cheaper and more effective? Could the number of 'local area forums' be reduced in favour of Councillors visiting electors door to door or holding surgeries, and making decisions for which they are accountable at the ballot box?

Despite the anguish caused by the unitary restructuring currently taking place, we should watch closely and learn from the results to determine whether more small Councils could be merged, whether in rural areas, former metropolitan counties, or London, with strategic powers moving to the new larger council, and the most local service delivery and decision-making being transferred to a reinvigorated and largely voluntary parish and town council sector, and individual Councillors. When doing so, we should ask why some Council wards have three Councillors – why not have one Councillor per ward for two wards of half the size, reducing costs but also making democracy more local.

At election time, should we really spend extra money on the 'sweep' of postboxes which takes place to ensure postal votes have been returned on time, or is it enough to say "Vote in good time, or on the day in person, or run the risk of not being counted"? Spending less on placating Government inspectors and trusting local people to vote out underperforming Councils could shave off a reasonable sum for many Councils too.

3) Spend less on choice. Giving people more choice has been a mantra of Blairite reform in the public services, and is enthusiastically welcomed by many Conservatives for obvious reasons, both ideological and practical. Sometimes, however, choice is excessively expensive and may make the ‘service user’ happier, but delivers worse outcomes overall, at a greater cost to the taxpayer..

Cheating, and taking an example from a different branch of the public sector, I have to question what value to clinical outcomes has been delivered by the recent £20m refurbishment of the London Homeopathic Hospital. More mundanely, allowing older people individual budgets to arrange their meals on wheels may lead to them getting what they want at a time convenient to them, but it can also mean significant administrative overheads, and the loss to the Council of economies of scale.

The public have been educated into expecting that accessing public services will become ever more like going shopping, and we will need to be honest about when that is sensible and practical, and when it is unaffordable or unproductive.

4) Spend less protecting people from small risks. There are some easy savings in "public protection". I don't see it as any concern of the taxpayer if my costermonger chooses to sell me a pound of tomatoes, and I choose to buy them. The state need only get involved if it emerges that his goods were not as described, or my money was not the amount promised. Bigger savings will require more controversial action, however. Is it up to the state to undertake test-purchases to ensure that 15 year olds cannot buy tobacco? Should we be aggressively inspecting restaurants' food hygiene standards, or would the public be better protected by more serious sanctions when there is a failure?

Gravestone toppling was raised recently on this site. There have been eight deaths in the last decade caused by falling gravestones, but is that enough to justify the expense of monitoring them? Local government needs legislative protection from claims for things any reasonable person would describe as 'accidents', in order to focus on better value for money activity, even if that is repairing pavements to prevent falls.

Speed bumps may slow cars down, but they damage vehicles, can delay the emergency services, and cost money to install and maintain. While they are a bugbear to many, I prefer speed cameras in locations where speed is identified as a problem – cameras set with a reasonable leeway, to catch those clearly exceeding a safe limit, and raise some money in fines which can be used to reduce tax for those driving more safely. A clampdown on unlicensed and uninsured drivers may do more for road safety in many towns anyway. A new balance may also need to be struck between finance and fear on issues as diverse as mobile phone masts on public buildings, and energy generation through waste incineration.

5) Share more information. There is understandable reluctance across the political spectrum towards entrusting the Government with personal data. I certainly agree that this needs to be done carefully, and it needs to be done cost-effectively rather than as an exercise in providing large IT consultancies with blank cheques. Even so, I have seen at first hand the savings that can be delivered through accurate sharing of up-to-date information, however it is delivered. The failure to share information about vulnerable old people between care workers and health workers for example is nothing short of scandalous, and pilot projects with closer working between GPs and care workers have been extremely successful.

However much we may mock the employment of someone as a "falls prevention adviser", sorting out an old person's home when they fall over once and don't hurt themselves too badly, by removing trip-hazards and so on, can save the taxpayer a vast sum in care home fees and surgery compared to letting them fall over again a week later and break their hip. We could do worse than target the pavement repairs mentioned above at areas with a high proportion of elderly residents.

Promising work has begun on joint appointments between some Councils and their local public health bodies to ensure joined-up management and leadership, but we will need to move further and faster at the operational level, sharing budgets, staff, and everything from eligibility criteria for help to procurement rules for outsourced contracts, delivering better value for money because of sleeker systems and better on-the-ground communication, not because of extra layers of partnership meetings"

6) Spend less on culture. I love libraries, museums, and theatres. Emotionally I find it very difficult to put them in a list of cuts, but when I look at the services delivered by local government in an environment of radical spending cuts, they are clearly in the "nice to have" column, not the "vital services" column. The publishing industry is finding new models which increasingly leave libraries less relevant as places people go for books, with many popular titles available second-hand from ebay relatively soon after publication at barely the cost of a library fine.

Many libraries are being renovated as 'information centres' or ‘discovery centres’, enabling people to use the interne, take classes, relax and so forth, and if measured in terms of number of visitors there have been some notable successes – but it's less clear that this has delivered important public policy outcomes. Equally, if there are not enough people prepared to pay full price for cultural experiences, how much will we be able to afford to subsidise them in these straitened times?

There will always be a place for big venues, and for subsidised school trips to give young people experience of the theatre and direct knowledge of the plays they are studying, but how much would we really lose if the middle-ranking productions were smaller in number? Maybe amateur productions in church and village halls would grow to fill the gap. Could we end the grants some Councils give to high-profile art galleries, and instead encourage up and coming local artists to exhibit temporarily in public spaces and empty shops, on condition they leave quickly when a paying tenant arrives?

7) Spend less locally. As the recession bites, more Councils are looking into ways to 'protect local business', speeding up their payment of invoices to local firms, sourcing more locally, requiring that contractors employ people locally. This is in principle admirable, but it both raises costs, and could be a zero-sum game if everywhere does it. Should then instead be looking simply for the lowest price?

Price-conscious customers are having to accept that their bank, or insurer, will often have a call centre on the other side of the world. Of course I like the fact that most Councils still use theirs to provide local jobs, and when you phone up you get someone who understands your local area, but it is not clear this really delivers a benefit commensurate with the cost. Why does every Council manage the investment of its own reserves, with unpredictable consequences? While Councils have done well over recent years in squeezing extra income out of their reserves, we have seen high-profile failures, and it is unclear why this needs to be handled at the very local level.

Finally, the elephant in the room of much public spending, which cannot currently be resolved by Councils as it is a matter in which the rules of the game are set in Westminster;

8) Spend less on pensions. This is undoubtedly the quickest win for an incoming Government, as the collapse in the stock market and falling interest rates on savings have caused substantial damage to the pensions of those with private sector pensions or cash savings. While local government pension schemes remain among the most adequately funded in the public sector, they are neither affordable nor fair in the long term. The next revaluation could easily see employer contributions soaring North of 20%, a level completely unacceptable to the private sector worker who has seen their pension collapse in value.

The easiest option politically would probably be to close the scheme to new entrants, but I would argue for wholesale reform – a new scheme offering a choice; final salary but at a lower accrual rate and with more of the cost borne by the employee, a defined contribution scheme such as prevails in the private sector, and a greater reward than at present for those who wish to opt out entirely and make their own arrangements. As senior-level pay in the public sector has risen to levels more commensurate with the private sector over recent years, the carrot of better pensions is no longer as necessary, so it is feasible to cap the pensions of top earners, say on the basis of a maximum notional final salary of around £80,000.

In contrast protecting a decent, albeit reduced, level of pension for lower-paid workers seems to me sensible – the dinner ladies and street sweepers are those otherwise most likely to have recourse to means-tested benefits in old age – meaning the same state funding, but with less of the dignity. A better pension deal for ‘hard to recruit’ occupations such as children’s social care would be a greater incentive if it were not on offer across the rest of the sector. Pension reform, unfortunately, will require central Government action. This action should therefore be designed not simply to enact a single reform, but also to make future reforms easier.

I am not necessarily arguing in favour of these proposals, and people far more senior than me have identified different areas for cutbacks at the ‘big picture’ end, and Harry Phibbs has suggested 100 ideas for saving money, many of which are small actions which would add up to a large sum taken across the country. In every one of those lists, including my own, there are some things I would undoubtedly oppose as a resident if proposed locally, and advise against as an officer if my Leader asked my opinion. Nonetheless, if we are to reduce the costs of local government on the scale that seems likely to be necessary, options like these have to be on the table, as well as fine words about further efficiency.

I am of course in the fortunate position that I don’t have to decide these matters, or defend the decisions made – I merely advise, implement, and hope my own career survives.

11 comments for: Local Government finance: Where the axe must fall

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