Not since the late 1980s has the financial forecast seemed so bleak. Every time we turn on the TV or radio, we hear ever-more depressing news of falling house prices, rising commodities costs and increasing unemployment. But, anyone with any sense, would have seen this coming. Property prices can't go up indefinitely, and the value of bricks and mortar can and will fall as the supply of easy, no-questions-asked credit dries up. The affect on business is clear, but to assume the public sector is somehow recession-proof would be foolhardy. There will almost certainly be some hard times and difficult decisions ahead for those in local government finance. Capital programmes, funded by developers on residential property deals, could stall, and councils will be put under pressure to increase borrowing to fund capital programmes. There could be cost pressures, too, on benefits, since, when the public purse is in trouble, the Government will look to decrease rent subsidy ceilings. Income streams will come under pressure as folk tighten their belts, so let's hope council investment returns are strong enough to offset at least some of this. And all this is against a backdrop of rising inflation, which has precipitated demands for pay increases across the public sector and led to threats of another summer of discontent. Meanwhile, there will inevitably be tensions as some councillors will want to reduce the financial pressures on residents, by delivering low council tax increases. But other politicians will want to deliver ambitious spending plans, regardless of the impact of the downturn on taxation policy. For councils where the latter win the debate, beware! These are the councils which will be in trouble if difficult economic conditions continue. Councils need strong political and managerial leadership now more than ever before. Richard Ennis is director of finance at Ealing LBC
