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Our incremental approach to public sector reform won't deliver

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This time next year, we will all be digesting the outcome of 2015’s spending review. 

Using history as a guide, this will set the financial landscape for years to come, including that for local government.

Economic growth and devolution will continue to be the dominant themes. The spending review will undoubtedly have a strong and lasting influence on the future role and shape of local government.

Between now and then, there will be a series of opportunities for the sector to continue to put forward a compelling case. We will have 2014’s autumn statement.  This will be swiftly followed by the party manifestos and then, the small matter of a general election.

The government has already set out plans to cut departmental spending by £8.7bn in 2015-16.  Depending on the longer-term economic strategy, further savings of close to £38bn may be required by 2018–19.

The current incremental approach to public sector reform simply won’t deliver on this scale. 

Only a more ambitious approach is likely to be successful; one that seeks to create a more balanced relationship between central and local government on issues such as health and social care, employment and skills, troubled families, offender rehabilitation and housing.

To understand the importance of the next spending review, we only have to look at the cost of 2010’s review for local government. 

For five consecutive years, we have seen a steady deterioration in our level of resources.

In London, this means:

  • A 44% real terms reduction in core funding
  • A 24% real terms reduction in revenue spending power
  • A cut of £740 per household (the highest cut across the country)
  • In the next two years alone, our councils will have to deliver savings of about £2bn.

To give you a sense of scale, this is more than the total current spend in London on street lighting, libraries and culture, planning and environmental services combined. 

Tough decisions await.

As we move through a series of events towards next year and its spending review, local government must continue to articulate a compelling vision of the future. The price is high. We cannot afford for this spending review to look like the salami-slicing of 2010.

Hugh Grover, collective pension investment director, London Councils



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