Relaxing before the big squeeze
One of the most surprising aspects of the unfolding public expenditure squeeze is the calm acceptance within county and town halls of the inevitability of steep spending reductions. Councillors and officers speak of “15% or 20% budget reductions” as if it were a gentle slow-down in the rate of expansion. There is no panic. The relaxedness of the response is remarkable.
When the Titanic hit its iceberg, the first response of excited passengers was to collect ice from the decks and take it down to the lounges to refresh their drinks. No one apart from the ship’s designer suspected the below-the-waterline hole in the side of the ship made its sinking a mathematical certainty. And, as we know, the band continued to play.
It is impossible to know whether local government is being over-relaxed about the public expenditure bloodbath that lies ahead. An early indication of how far councils are preparing for a long period of reduced real budgets will come in the weeks ahead, as finance officers present their proposals for the 2010 budget.
A number of authorities will be aiming for council tax rises close to zero. In London, where there are elections next May, there is already evidence of both Conservative and Labour boroughs wanting to freeze the tax. Some will go further, with reductions or promises of a “cash payback”.
It is impossible to know whether local government is being over-relaxed about the bloodbath that lies ahead
Tony Travers, Director, Greater London Group, London School of Economics
The inevitable, counter-intuitive, consequence of local government’s approach is that it will be relatively easy for the Treasury to squeeze councils harder than, say, the NHS. The health service managed to run deficits even when money was being pumped in fast. The Chancellor will be told that the NHS cannot make real cuts, while councils can. Councils that freeze or cut their council tax will be cited as evidence that there is waste to be cut.
In the same way banks enjoyed bail-outs while public servants now face job and income cuts as a result, the Treasury’s approach will not make sense. But that doesn’t make it less likely to happen.
There will be a public sector pay freeze that could last for more than one year. Vacancies will be unfilled. A long pay and employment freeze, however stressful, may well prove the least painful way of delivering cuts in public spending. The State would shrink because public servants’ pay and pensions were squeezed.
Local authorities appear resigned to such a future. But there will be serious obstacles to its success. For a start, it is unlikely the trades unions will willingly sign up to their members taking the strain of reducing public borrowing. The need to maintain such an approach for several years will create a build-up of resentment and unmet needs.
Accepting the inevitability of cuts before they actually need to be made is easier than implementing them. Very soon the going will get very tough.
Tony Travers, Director, Greater London Group, London School of Economics
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Readers' comments (2)
Blair mcpherson | 16-Oct-2009 5:32 pm
I think some officers are struggling with members who are in denial. They have asked for budget proposals to make reductions of 10, 15 or 20% but can't comprehend the implications. Rather like those passengers on the Titanic. This is not helped by those who give the impression that efficiencies will deliver painless saving with out the need to cut services or make staff redundant. Streamlining the management structures and reducing the number of HR, finance, policy and admin posts might save you 1 or 2 % but not the 10 or 15 % required. Budget reductions of this magnitude are clearly unimaginable hence the calm.
Blair
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Bobby Austin | 28-Oct-2009 2:42 pm
I am not sure why this is so surprising. Government these days is desinged around spin and froth, telling people want they want to hear rather than what they need to hear. Every man and their dog is telling anyone who will listed (or publish) that it would be catastrophic to cut services in their area and as such the public frown upon anyone saying it is time to jump in the life rafts. So with "the ships designer" (in our instance the Prime Minister) dithering whether to tell us or not that we are going to sink, the band plays on. Of course, like Canute, there will be some Chief Execs and leaders who think they can hold back the water. I just hope I don't get trapped below decks because I would like My Heart to Go On.
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