DCLG understanding of cuts impact questioned

The Department for Communities and Local Government needs to improve monitoring of councils’ financial health, as auditors identify concerns that some authorities may be unable to deliver their planned savings, according to the National Audit Office.

The recommendations come in two reports published today by the NAO covering the financial sustainability of councils and the impact of funding reductions from central government. The NAO found that the department needs to be more active in informing itself about the strain councils are under on the ground, in order to head off serious problems before they happen.

Amyas Morse, head of the NAO, said “It should look for evidence of financial stress in local authorities to assure itself that they are able to deliver the services for which they are responsible. “It should be clear about the knock-on effect of the various funding decisions taken by departments in Whitehall.” The first report, into the impact of funding cuts, revealed that 16% of single tier and county councils had difficulties in delivering their 2013-14 budgets. This figure was 22% among metropolitan districts, with increasing numbers of these relying on unplanned reductions in services to balance their budgets.

Moreover, local auditors interviewed by the NAO raised concerns about the capacity of 56% of metropolitan districts and unitary authorities to deliver their medium-term financial strategies. The report said auditors are concerned that some authorities are unable to show how they will deliver savings required in 2015-16 and beyond. “Furthermore, where they have identified methods to deliver savings over the medium term, these often involve substantial, but largely untested, restructuring and transformation of services,” it said.

The second report contained a number of concerns about DCLG’s ability to monitor the effect of cuts properly. It said that the new measure of “spending power” introduced by the coalition government does not measure overall changes in funding because it does not include allocations. “The department has not developed a way of showing the extent of funding reductions over more than one year at a time,” it said. “This reflects the complexities of producing a genuinely like-for-like time series due to a number of changes in the duties placed on local authorities over this period.” The NAO went on to say that the department has limited understanding of the size and timing of savings necessitated by service transformation.

Claire Kober, chair of the Local Government Association’s resources board, said: “This report paints a stark picture of increasing financial risk and uncertainty for local authorities. It shows that central government has not taken a comprehensive approach to assessing the impact of its decisions. “With further public spending cuts expected in the next Parliament, it is clear that a “more of the same” approach will not work.” She said that popular services could only survive if local areas are given devolved powers to decide how they are provided and paid for.

Responding to the reports, local government minister Kris Hopkins said: “The reality is since 2010 budgets have been balanced, council tax has fallen by 11% in real-terms and public satisfaction with local government has been maintained. “But there is still much councils can do to cut waste and make sensible savings, such as using their reserves, making better use of surplus public sector assets, clamping down on fraud, boosting council tax collection rates and sharing back offices.”

Photo: “Scissors” (resized) by James Bowe is licensed under CC BY 2.0