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No escape from the grip of austerity

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

Danny Alexander’s announcement on Monday that Whitehall departments will in future be required to hold back 5% of their budgets as, in effect, an additional contingency reserve means more resources will in future be held back from public services.

This ‘holdback’ of money will, presumably, be in addition to the further round of spending cuts required in the next spending review.

This initiative signals that the UK is now only 13 months into what may be a seven-year austerity programme

The chief secretary’s initiative is part of the government’s longer-term attempt to control the nation’s finances. But it also signals the reality that the UK
is now only 13 months into what may potentially be a seven-year austerity programme - and even this baleful conclusion assumes Spain and co are not about to drag the European economy over a precipice.

The Department for Communities & Local Government has hitherto been happy and willing to embrace the chancellor’s austerity programme. Eric Pickles has wanted to appear among the most willing of Cabinet members to deliver spending reductions. Because most of these are handed on to local government, councils have been at the front end of the process of deficit reductions. It is surely likely that a requirement to hold 5% of departmental resources for possible redirection will lead to a disproportionate impact on local authorities.

No one can seriously imagine the NHS or defence will see their resources cut by another 5%, so councils will be made to go relatively further. The longer-term implications of the government’s approach will be to leave many councils making budget reductions in every year up to 2017-18. With increasing populations (the Office for National Statistics shows sharply rising numbers in many areas) and rising demands for care for the elderly, continuing pressure of this kind will require radical changes from councils.

There can be little doubt now that local government will have to plan to reduce the scale of its operations - certainly as compared with the level of provision achieved towards the end of the last decade. Things will probably change for a generation, particularly if economic growth remains anaemic for several years. Councillors and chief officers will have to spell this out to the public: there will be no escape from the grip of austerity.

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

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