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Bad times are here to stay

Tony Travers
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Director, Greater London Group, London School of Economics

Councils have received a miserable Christmas present from the Treasury. In the light of the chancellor’s announcement that there will be a public sector pay cap for a further two years, adjustments have been made to spending levels for the years up to 2014-15. The Department for Communities & Local Government’s ‘local government’ spending line has been cut by £240m in 2013-14 and £497m in 2014-15.

Local government now operates in a perverse world where its capacity to deliver well-managed spending cuts will be taken as evidence it should be cut further

The pay limit applies across the public sector (except at London Underground, where it is ignored) and will therefore affect the NHS, schools and other parts of government. However, and predictably, the NHS, schools and international development will be “recycled within existing budgets”. That is, local government will see its spending plans cut, while the NHS and schools won’t.

Local government now operates in a perverse world where its capacity to deliver well-managed spending cuts will be taken as evidence it should be cut further.

Councils, because of their local democratic legitimacy, have been forced to use all their skills to mask the worst effects of government-imposed expenditure reductions. Health service spending will rise by 3.8% in cash terms this year, while local authority revenue spending fell by more than 3%. DCLG capital programmes have been chopped by 46%, compared with an 11% public sector average.

Ministers are afraid of the damage that would be caused by grim headlines about cuts to children’s services, lengthening waiting lists and all the baleful outcomes of the rapid slowdown in the rate of growth of NHS resources. The press is already full of such stories. By contrast, councils have been far better able to deliver efficiencies while still maintaining provision.

The need to protect the NHS, schools and international development will mean less entitlement to care for the elderly, fewer libraries and more litter in the streets. Public sector austerity will last until at least 2017-18 - unless the eurozone implodes, when cuts might have to continue until beyond 2020.

Council expenditure at the end of the current decade will probably be at the level, in real terms, it was 20 years previously. This may be a bleak midwinter message, but it is an entirely realistic one. Bad times are here to stay.

Tony Travers, director, Greater London Group, London School of Economics

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