What we think of the Spending Review

Two days after the CSR last week, The MJ and a major HR services group Penna together hosted two separate round tables with leading chief executives from across all tiers of local government to sound out their views. Michael Burton, who chaired both events, reports on their reactions A quick show of hands at both The MJ/Penna round table discussions last week showed one clear verdict. Even though local government came out almost the worst of any part of the public sector, none of the assembled chief executives was surprised by the settlement. One county chief said the cuts of 28% over four years were just 2% off his own predictions. Most chiefs have been planning that level of cuts for at least 12 months. However, one district chief pointed out that the grant cuts were just one part of the full story. He said that by the time they factored in the cost of concessionary fares and the 10% cut in council tax benefit which many councils may well have to shoulder, the full picture was more like another 15-20% on top. Another participant pointed out that while the end to ring-fenced grants was welcome, poorer areas were often the main beneficiaries of them. There were real worries, especially from districts, about the impact of taking on responsibility for council tax benefit along with a 10% cut, plus the fall-out from changes to housing benefit. One chief said he could envisage a scenario where tenants would no longer afford even ‘affordable' homes. Another said that cuts in welfare would simply increase the number of claimants ending up on the doorsteps of social services. And, as councils grappled with cutting council tax benefits, more resources would have to be diverted to face-to-face interviews with claimants. There was also concern that hospitals and PCTs would engage in more cost-shunting, as their own budgets were squeezed. Suggestions that councils might allocate to other services their half of the £2bn extra for social care were rejected on the grounds that adult care was already a major financial headache, and any extra support was more than needed There was irritation at the so-called ‘dirty tricks'. These included the 1% increase in the Public Works Loan Board rate, which could cost councils another £40m a year, and the transfer to the Treasury of carbon-reduction commitment benefits. A further complexity was the electoral cycle. The CSR might work on a two to four-year turnaround, but local elections do not. For example, a new council administration in London might be tempted to front load the biggest cuts so that by the time elections come round, they are seeing the fruits of their initial pain. Another administration might want to spread out cuts because their elections are coming up next year. There was scepticism that the supposed 490,000 jobs lost from the public sector would be picked up by new jobs in the private sector – in fact, quite the reverse, with cuts leading to job losses in private companies supplying the public sector. The following quotes come from the two round tables: Overall reactions ‘It's not about weathering the storm, it's about adapting to a permanent fiscal climate change' ‘I don't think people have changed their view that they still want American levels of taxation and Scandinavian levels of services.' ‘I feel relatively prepared for it. My politicians are less prepared. The community is even less prepared, as nothing has happened yet.' ‘Sector support is vital. The failure of one of us is a failure of all of us. Most are prepared, but the worry is those who think they are prepared but are not.' ‘Almost any organisation can take money out. The question is, what does it do to your reputation?' ‘Being prepared is one thing – implementing it is another.' ‘Two-thirds of my district's income was in fees and charges, and we were hit badly with the recession. Now we're getting hit on the last third.' ‘Our new freedoms are, you can wield your axe as you choose.' ‘Capital spend has fallen off a cliff.' ‘We delivered the most savings and this is our reward.' ‘Chief executives are like teabags. You only know how good they are when they're in hot water.' ‘There'll be many more changes in six months as a result of the recent policy announcements.' On ring-fenced grants ‘Northern and metropolitan areas could be harder hit, as they are the poorest. Ring-fenced grants were often aimed at deprived areas.' ‘Getting rid of ring-fencing is fantastically welcome.' ‘The total cuts are within 2% of what we were planning.' ‘Local government is the worst hit government department, other than BIS.' On social care ‘I'm not convinced about NHS funding. Cost-shunting is heading in our direction.' ‘About 50% of our growth pressure is from the ageing population. We're more likely to cut other services to fund adult care rather than the other way round so, no, we won't fillet the extra £1bn we've been promised for social care.' ‘At least it (the £1bn) is a recognition of the ticking time bomb which is adult care.' ‘My county has 1% of the population, so if we get 1% of that £2bn, that would meet 80% of our cost pressure.' ‘The £1bn in social care isn't serious money. I don't believe it exists.' On council tax benefit and housing ‘It's a tricky area, raising rents and capping benefits, because they could well just end up on social services anyway.' ‘Our vulnerable people are in our housing estates, and their future is still unclear.' ‘If we're going to have to pick up that council tax benefit cut of 10%, then that's another cut. I reckon the cuts of 28% will mean another 15-20% on top when you factor in concessionary fares and benefit cuts.' ‘It might even be that council tax benefits will finish off districts.' ‘In my district, the concessionary fares is another cost. It's difficult to work out the housing strategy. I've real worries that capping benefits and putting up rents will be a problem. We will start seeing people who can't even life in affordable homes.' ‘I can see with housing benefit a lot of time spent on face-to-face interviews.' On dirty tricks ‘It was a dirty trick to put up the PWLB rate by 1%' ‘Another dirty trick is moving the benefits of the carbon-reduction commitment to the Treasury.' On staff and morale ‘We've already prepared for 7% cuts next year, and identified savings of £15m next year, then another £15m, then another £9m. That's a real psychological challenge for the staff. We're getting challenging discussions with unions, and industrial relations are worsening.' ‘It's more about the people than the money.' ‘You can't have four years of relentless budget cuts. You have to get it over with quickly.' ‘We've told staff 75% of them will still be here. We need to tell them what they will be doing in four years time.' ‘A big issue is the different skills sets we'll need.' ‘I'm less concerned about recruiting the right staff than finding the right members.' On job cuts ‘Can 490,000 people be absorbed into the private sector? I don't see it.' ‘We don't have public and private sectors – we have an economy. The private sector is also affected by the downturn in the public sector.' ‘The business sector is in for a real shock.' On community budget ‘prototypes' ‘Community budgets won't happen overnight. They will take time.' ‘There's a glimmer of hope, because of the community budget prototypes.' ‘The community budgets pilots are a fudge – they're already doing it.' On Whitehall ‘I've worked through four recessions. The difference this time is there will be real cuts in Whitehall.' ‘If there will be a void at the centre, we should think about how we can fill it.' ‘I'm not sorry to see the government offices or the RDAs go, as they didn't add a lot.'

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WHITEHALL

What we think of the Spending Review

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