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Peter John: When is a surplus not a surplus?

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Like council leaders across the country, I have spent the last few years with my colleagues taking ever-harder decisions about which of our vital local services can be squeezed a bit further before they fail.

Imagine my surprise, therefore, to read in LGC last week that analysis on behalf of the County Councils Network by PwC suggests that, in fact, London local government has apparently been enjoying “surplus” funding for the past few years. This is wrong headed and hardly consistent with the sort of mature conversation that the sector as a whole needs.

All councils all over the country have been going through the same tough debates about cuts. Should parks, libraries or environmental protection be hit? Can we keep reducing the costs of adult social care, as we have, year on year? Can we keep asking our shrinking – but incredibly dedicated – workforce to keep doing more and more? Can we protect just a little bit of preventative spending now to ward off greater costs – and greater misery – down the line? You will all know how this feels.

Over the last nine years, London boroughs have seen their spending power – after allowing for increases in council tax – cut by 28% in real terms. And that’s before we take into account the million extra people now living in the capital. We have cut spending by £4bn. We have reduced our workforce by 50,000. As the Centre for Cities recently reported, “London also saw huge reductions in its spending, accounting for 30% of the total cut to local government day-to-day spending since 2009-10, despite being home to 16% of the population.”

And still austerity rolls on. While no one can yet tell us the outcome of the spending review – or even if it will happen – we expect to have to save at least another £1.5bn over the next three years.

So, given that, what does “surplus” really mean?

PwC’s analysis begins by projecting forward spending estimates from a 2015-16 baseline to 2024-25, in order to calculate the potential council funding gap each year. So far, so unremarkable. But, in doing so, they have adjusted their baseline to reflect “a more consistent level of quality of service”.

This means adjusting the unit costs of services for the different cost of providing services in different areas – but not, crucially, for the full extent or complexity of demand – and then calculating the lowest average cost across all classes of authority, and assuming all councils should have spent at that level. This becomes the baseline. The report then recalculates every council’s spend based on these average unit costs, to give a new, wholly notional distribution baseline for 2015-16. Councils spending more than this notional calculation are described as being in “surplus”.

Although dispiriting, this is sadly no great surprise. The argument is a modified version of the familiar complaint that if only resources were spread evenly per head of population, life would be “fairer”. Once upon a time some people argued that everyone paying the same for council services was “fair”. The IPPR recently argued for fundamental reform of council tax on the grounds that it is becoming increasingly regressive, and more and more like the poll tax it replaced. The argument for flatter per capita funding is inverted poll tax reasoning. It deliberately ignores the fact that some people – including, of course, the most vulnerable in our society – have very particular needs for support from local services.

There is a serious debate to be had about just how much money local government needs, where it comes from and how it can be directed to where it is most needed. I am pleased that the CCN/PwC work as a whole will help the wider local government sector to amplify some key arguments as part of that debate. But to suggest that London boroughs have spent the last five years dealing with the problem of having too much money is frankly insulting. Not just to those councils, their current staff and the thousands who no longer work for them. But more importantly, it insults the communities we serve – particularly those who rely most on public services and have suffered most from a decade of austerity.

Peter John (Lab), chair, London Councils

*This piece was amended at 2.40pm to clarify that the PwC analysis does include some measures of demand

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Readers' comments (2)

  • you could describe the reports short comings in many ways, but to say it insults communities in London is just silly, surely a leading politician can do better than this.

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  • The guy needs to get out of London and do some real comparing and contrasting. No bells and whistles to cut out in the shires, while London boroughs continue to benefit from huge parking income and property portfolios. Meanwhile the consultant merry go round in the capital continues unabated - surely a vastly inefficient way to run services.

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