Mandy Bretherton: Bleak winter for local government demands new skills in finance

Mandy Bretherton is Technical Manager at CIPFA, responsible for Treasury Management and Adult Social Care Panels.

By the end of 2014 less than 40% of the government’s fiscal consolidation plan had been achieved, placing major pressures on public services during the year as the government strove to continue reducing the deficit. This of course included local government which, as an unprotected area of spending, has seen central funding cut by over a third since 2010.

The continuation of the Council Tax freeze, in effect a crude and universal cap on an essential revenue stream, has continued to compound in 2014, increasing the erosion of the local tax base. Uncertainty over the level of business rate income has added to pressure on council treasuries, especially as the risk of appeals against rates was essentially devolved to local authorities and so presented something of a curve ball for councils.

These pressures when added to a pugilistic approach from government ministers on issues as diverse as parking charges to reserves management have seen many in the sector despairing of a more measured approach to local government funding from Whitehall. So far, the sector has met the financial challenges faced and should be congratulated on this, but the task in hand becomes much more difficult as time goes on.

Unfortunately the prospects for 2015 are no brighter with no let up from spending reductions. Further cuts are already planned including reducing central spending on local government between 2013/14 and 2015/16 from £16.6bn to £12.1bn. These planned cuts, coupled with the ongoing demand led pressures including adult and children’s social care, welfare reform and the uncertain implications of the Care Act, mean that the need for sound public financial management has never been more important.

It is also highly likely that any new government will introduce a spending review by the end of 2015, with more spending pain for local services almost certain.

Finance teams therefore need to continue to support this process by providing good financial information and advice to enable policy makers to make sound decisions and use public money wisely. If such advice is not forthcoming it’s possible that not only will we see the poor use of public money and inefficiency, but we may also see the failure of some services.

Outsourcing and other aspects of the private sector are also likely to play an increasing role in delivery over the next few years. Finance teams in 2015 and beyond will need a wide range of new skills to navigate this emerging public sector world. This would include improved commissioning, contract negotiation, financial modelling and greater partnership working as local government strives to find the efficiencies, savings and innovations to enable them to continue to deliver for communities.

Photo (cropped) by Nick Kidd