Public sector cuts 'only the start'

Published:  11 June, 2010

UK: Cuts of £6.25bn are only the start. Local government has little room to move. Will this affect merchants with local authority contracts? Chris Smith reports.

That there are tough times ahead is in no doubt, but what is emerging from the battle over public sector budgets is the real unease local government is feeling.

The sector is facing what one council finance expert described as "the perfect storm" and, at the same time, may have to confront the real prospect of watching other parts of local government escape relatively unscathed.

Councils are calling for clarity - and demanding ministers rethink the idea that unreformed sectors such as health, education, the police and benefits should be protected by ring-fencing to placate voters and the media.

A scramble is going on, both in Whitehall and with councils, to work out how the initial cuts announced by the new government will work out. But there is also concern at the spending review tabled for June.

An industry insider said: "This is very much a changing picture. There is a new ministerial team with a lot of ideas and a desire to move quickly.  "This leaves us with a choice – we can either react to what gets handed down or get involved now and shape our own futures."

Ministers are looking at in-year cuts, and councils will have planned for the cash.

The longer ministers take to decide where the axe falls, the more difficult change will be.

"The danger is that it will create winners and losers among councils, while leaving poor performers unreformed," said one finance expert.

What are the options? The tools are already there and many are dusting down the 2004 Gershon review.

IDeA efficiency guidance, updated in February this year, highlighted electronic service delivery, procurement, productivity, service transformation, strategic commissioning and the third sector as possible options.

The Local Government Association is battling for a deal which ensures core grants are kept to create a sustainable funding package, but in return, councils will get creative and deliver real savings – the magic £22.5bn figure to hook ministerial attention.

It is pushing for the Government to focus on the cash lost between allocation and delivery.

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