There is no escaping that the next 24 months will be exceptionally hard for local authorities.
The challenges are well-rehearsed, and local leaders have become accustomed to setting their budgets during periods of prolonged crises and uncertainty. Yet, for the authorities that we're working with on the ground, there has never been a greater sense of exposure or vulnerability – both within communities and across their organisations.
The chancellor's Autumn Statement needed to achieve two difficult tasks – restore credibility in financial markets and ensure that the recession is not made longer and deeper than expected. The initial reaction from markets and the Office for Budget Responsibility (OBR) forecasts suggest that this has been achieved.
The OBR's forecast (of returning to growth in 2024) is more positive than The Bank of England's view that the recession will last into 2024. This difference of opinion afforded the chancellor a little wiggle room (but not much).
While the majority of the announced consolidation of public finances has been pushed to after the next election, there will still be a lot of short-term pain to endure in local government.
Speaking to S151 officers, the theme of a little more wiggle (but not much) seems an apt summary for the impact of the Autumn Statement on the local budget-setting process. While authorities were given "council tax flexibilities", increases to the National Living Wage from April 2023 will impact contract prices, and, in percentage terms, the additional social care funding is less than the inflationary pressures facing social care today.
Relatively strong levels of resilience (fiscally and otherwise) have been key to the sector's ability to consistently rise to the challenges of the past 15 years. However, the continued erosion of the sector's fiscal position (and therefore underlying resilience) could leave it very exposed to the next shock. Be that another pandemic, prolonged consequences of the conflict in Ukraine (e.g energy costs) and increasing demand on services through the cost-of-living crisis.
Fundamentally, when local authorities are in a period of financial distress, it limits their capacity and capability to invest and drive better outcomes for their residents and local economy. When officers are trying to keep their heads above water in the short term, it restricts their ability to plan for the long term.
We're about to see what happens through a difficult winter and critical post-pandemic phase, and there is a real risk that a lack of resilience could cause service and financial failure.
Local authorities have three months to finalise their budgets and, ultimately, sustainability in the short to medium term will come down to prioritisation and modernisation. How councils prioritise strategic and operational resources as bandwidth is limited, and how they accelerate opportunities to deliver services more efficiently.
Simon Christian is director, Public Services Consulting, Grant Thornton UK LLP
