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Becoming experts in rationing

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Ever since the concept first formally emerged in Anglo Saxon England, local government has been an arena full of  uncertainty, rapid change and enormous challenges; arguably never more so than now as the public sector recession bites, with the recently announced unprecedented grant reductions for individual councils.

On  every day of 2011 the pace and depth of reform needed to address the front-loaded nature of the spending review grant cuts will be in sharp focus as  local government makes a major contribution to the Coalition’s deficit reduction strategy.

It will be hugely challenging for councils to successfully implement the cashable efficiency gains they are budgeting for. For every pound they do not manage to cash, an additional pound will need to be removed from front-line service delivery - as the equation is a zero sum one.

Some councils will use this situation as a creative platform for increased efficiency, productivity and financial self-sufficiency, while it will be beyond others, which will risk running out of money.

Part  of the difficulty for councils in meeting 2011’s challenges will be a lack of some of the commercial skills required to transform their organisations. Recruiting and retaining more people with such acumen will be a necessary and difficult task in the year ahead.

2011 will also be a year in which councils will find it hard to avoid compulsory redundancies after their financial settlements have encouraged further major cuts in the size of their workforces, with reductions over the next four years still anticipated to be at least 100,000 in England.

For many councils the year ahead also heralds the tension of elections which in some parts of local government are annual. This governance framework deters local politicians from making sound long term financial decisions through its encouragement of local electoral short termism.

In terms of specific challenges, I predict councils will continue to struggle to successfully integrate adult social care services into the health economy.

Perhaps above all, councils in 2011 and thereafter will need to become, for the first time, world class experts in rationing, as, in order to survive, they will have to be ruthless in deciding on front line service priorities; reducing or scrapping those considered relatively lower priority and culling large parts of their capital investment programmes.

Iain Hasdell, KPMG’s UK head of local & regional government

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