Birmingham cites unequal cuts in response to Kerslake improvement report
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Birmingham City Council has hit back after a Whitehall review accused it of having no “Plan B” if assumed central support of £265m is not forthcoming.
Concerns about the council’s long term budgeting were raised in a review of governance and organisational capabilities of the council led by Department for Communities and Local Government permanent secretary Bob Kerslake, published yesterday.
The review said that if the government money – largely for children’s services – is not forthcoming, it will be faced with a combination of low reserves and a “huge financial challenge” in the two subsequent years.
It said: “The existing service review process appears to have been based on the assumption that that the additional funding from central government will be made available in 2016/17 and 2017/18 when that decisions is completely outside the council’s control.
“We have not been presented with evidence that the council yet has a credible plan B if the additional funding does not materialise.”
A statement from the council said that a review undertaken by Lord Warner, commissioner for children’s safeguarding, said that the council’s own money would not be enough to meet its children’s services improvements programme.
It said that it would “continue to ask the Government for financial assistance to deliver this programme”.
“The council’s financial strategy therefore provides for this additional funding in 2015/16 and recognises that it increases the gap to be addressed thereafter,” it added.
Kerslake’s report said that the council needs “as a matter of urgency” to develop a robust plan for how it will manage its finances up to 2018/19 without recourse to further additional funding from central government.
This should propose significant further reductions in costs and measures to tackle levels of demands, it said.
In response, the council said: “We recognise the importance of better tackling demand management in some key services, but the report fails to acknowledge the risks of cost driven demand management in certain areas such as child protection and adult social care with which we, at a local level, are all too familiar.”
Kerslake’s report praised the council for effective decisions in achieving savings so far, along with a “robust” monitoring process to ensure the delivery of efficiencies.
But it added that the reductions have been “too reactive and tactical”.
It said: “This is not sustainable. They need to be more strategic, transformational and underpinned by stronger analysis. A step change is needed.”
The council responded: “We are clear that we need a different medium term financial strategy that more clearly supports our priorities and key outcomes, and underpins the model of the future council.”
It said it was already considering how to implement this ahead of the 2016+ budget cycle.
A statement released by the council also said it was disappointed that the report did not explicitly recognise the “impending financial crisis in local public services across the country”, and said that it faced a reduction in spending power of 5.7% next year, compared to a national average of 2%
In a dig at the department, it added: “The recent report of the National Audit Office echoes these concerns and makes clear that the DCLG has failed to monitor adequately the risks of the present funding policy.”
Following the report, communities secretary Eric Pickles announced that he will appoint an independent improvement panel to provide support to the council to in implementing changes. The panel will report back on progress in December 2015.
Pickles said: “I thank Sir Bob and his team for their work and look forward to seeing how Birmingham, its leaders and the improvement panel I am appointing respond to the challenge he has set them.
“But be in no doubt that if they do not, the next government may decide to take much tougher action.”
Photo (cropped) by Matthew Black
Birmingham have a right to be aggrieved at their treatment by DCLG. Had Sir Bob’s report examined the role of DCLG, it would have found that Birmingham had been given a disproportionate share of grant cuts (9% higher cut in spending power and over twice the England average grant cut per dwelling) and had been failed by DCLGs grant protection arrangements. As one of the top ten deprived councils in the Country and a council heavily dependent on grant to meet its statutory responsibilities, the fact that the councils has not received any damping protection and has instead had to make over £40m of extra cuts to pay for the protection of the least deprived and least grant dependent councils in the country shows just how flawed DCLGs grant system is. NAOs recent reports into the financial sustainability of local authorities have identified some of the failings at DCLG. The evidence that I submitted to PAC warrants a further independent investigation of other failings , particularly their ineffective attempts to provide protection for the most grant depending authorities. Parliament needs to better understand the failings of DCLG to allocate grant cuts fairly around the country; the huge risks that this poses for the financial viability to councils and the sustainability of the local government finance when it considers the 2015/16 grant settlement. The citizens of Birmingham and all those parts of the country suffering from the failings of DCLGs approach need better protection and quickly, from a more proportionate approach to allocating funding cuts and a system that gives effective funding protection, which can be achieved while also incentivising growth. How many councils will need to fail and how many citizens will need to suffer before effective action is taken?