Paul Woods on another £1bn of cuts

Paul Woods is the director of resources and S151 at Newcastle Upon Tyne City Council and is a financial adviser to the Association of North East Councils.  

Peter Findlay: We’ve seen a further £1bn of cuts emerge this week…where does it all end for local authorities?

Paul Woods: Going back to the spending review basically we were told local government was going to get a 10% real cut in 2015/16 which was at the higher end of cuts across all government departments.  So you had schools protected, defence protected, NHS protected and then local government getting about £2.1bn of cuts.  The government said there would be extra money for Dilnot, for pressures on social care, and we treasurers went away and did our projections.

On the 25^th July, the DCLG published a consultation paper about how that was going to be implemented and the first thing we saw came as a bit of a surprise: the cut in our core funding wasn’t going to be £2.1bn but £3.1bn – so an extra £1bn had crept in.

What we found was those extra pools of money that government had said were for social care and so on, were actually being funded from a cut in the core budget.

I should make the point that it’s not necessarily a £1bn extra net cut but it’s a £1bn cut in our core budget with some councils getting money back for additional spending pressures.

PF: So is it back to the drawing board for medium term planning?

PW: Well it is a bit. It’s another £8m in 2015/16 for us which isn’t in the current plan. The unsettling thing is that at every turn the numbers are changing.  So in the Autumn Statement last year the cuts went up; the March budget this year, the cuts went up; the Spending Review, more cuts announced; the clarification of the Spending Review, more cuts announced. It’s very difficult under these conditions to get a stable position to develop a meaningful medium term financial plan.  You spend a few months putting your plan together and the numbers change again.

So there’s a lack of stability and a lack of predictability coming out of DCLG but there’s also a lack of honesty about how the £2.1bn will translate into cuts at the coal face. The government made a statement telling us there was only going to be a 2.3% cut. None of us have been able to find out how they arrived at that figure and government hasn’t provided any evidence to support it.

When I look at it I see a £3.1bn cut in 2015/16 which came on top of a £2.4bn cut in 2014/15 – that’s £5.5bn of cuts from core funding over two years or a 25% real cut by 2015/16.

PF: Has the government moved the goal posts or did they just not know how much the cuts would go up by?

PW: There’s been a little bit of smoke and mirrors and of course it would have been better for us if DCLG could have given us a better idea of the numbers from the outset. The presentation of these cuts to parliament and the public has been somewhat deceptive.

I know as a practitioner that if I’ve got make a 25% real cut in our expenditure then I can’t do it by taking it evenly from every part of the budget.  Take children’s social care spending for example, where it has not proved possible to reduce overall spending due to the increased pressure from additional numbers of looked after children. I know my council can’t possibly make a 25% real cut there in the next two years.

PF: So the additional £8m of cuts for 2015/16 can only come out of frontline services?

PW: It can only come out of frontline services. It’s on top of the £17m we’re having to cut in that year anyway to meet the cuts already announced.  Any efficiency savings we’ve already squeezed out have gone back into funding services like childcare and so every marginal extra cut is coming off services.

We can’t make cash savings in children’s social care and I can hardly touch adult social care, waste costs are going up because of landfill taxes and so it leaves a smaller basket of services around highways, footpaths, libraries, culture, planning and economic development which are suddenly going to be exposed to very big cuts indeed.

The total spend on libraries in the UK is £776m – that puts the £1bn of extra cuts into some context. The size of the cut shouldn’t be understated but they are being understated by ministers.  Our approach is to say while we accept we have to take a fair share of savings, ‘ we can’t deliver this extra £1bn’ as it is a step too far – and there are some genuine choices that need to be explored.

PF: What are those choices?

PW:  I think local authorities should have more say and what we’ve suggested to the LGA is that they produce a questionnaire around the issues local authorities should have a voice on.  Do we as councils, for example, want to spend money in a different way to how the government is suggesting, and take the cuts as they’ve set out – or not have the cuts at all?

We should also be looking at the pattern and distribution of cuts around the country.  And while that disparity is now being recognised by the National Audit Office, and the LGA, nothing has yet been proposed by way of an alternative.

PF: How would treasurers restructure the funding model?

PW: For the good of the country as a whole, we have to look back to some of the quality independent reviews of local government funding like the Layfield Committee and the Lyons Inquiry which put principles of equity, transparency and needs based funding at the heart of their recommendations. Once you get the principles laid out then you can think about how you implement them in a coherent and sensible way.