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Sage observers always used to say that you don't judge a Budget or Spending Review by the immediate reaction to its announcement. I suspect that remains wise advice, but one can hardly say that the chancellor's 20 October message or measures have been elaborately concealed and only capable of full understanding once serious technical analysis has been undertaken. Yes, we still need to be able to trace a significant chunk of grants which are not properly accounted for in the announcements so far. The fate of almost 60 former grants amounting to some £2.2bn is still uncertain – we assume that much of this funding will be rolled into the new 'core revenue' grants, but this needs to be made transparent, and quickly. John O'Brien is chief executive of London Councils Overall, however, the story of significant retrenchment and sustained reduction in available public finance was very clear. Front loading was, of course, the most unpleasant surprise. We now calculate that the cash cut in new formula grant for London boroughs in 2011/12 will equate to 12.5%. Everyone's eyes are now firmly set on early December and the settlement. For us in London, changes in the floor regime or changes in area cost adjustment could be devastating. Our firm belief is that with a review of local government finance scheduled to start in 2011, this is no time to be making further fundamental change to a funding regime which is already based on an unstable and muddled four-block model. The model needs to be frozen until after the review. In the meantime, cuts should be applied in a uniform way to each authority's current level of funding, not to the overall pot of funding, which is then distributed through a volatile and unpredictable funding formula. The specific impacts are, of course, only just being assessed – from how to cope with the pressure on primary school places, where we have a 28,000 shortfall in future years, to the reductions boroughs will see in local transport scheme funding and many more beyond. One of the headline stories about London is preserved investment in vital projects such as Crossrail, Tube upgrades and the Olympics – which matter for the country overall, not just London. We are pleased about that, and have played our full part in advancing those cases. That headline, however, can conceal the everyday challenge of dealing with some of the most stubborn social and economic challenges of any part of the country, and with the costs implied by the unique churn of London's population. It is important that message is heard about London also. In the short term, the focus is on budget gaps, on cuts and job losses. In the medium term, however, as we can already detect from the responses of a number of authorities – in London and elsewhere – the changes that this Spending Round herald seem likely to have an even more far-reaching impact on the way we view our overall purpose, our jobs and our organisations.

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WHITEHALL

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