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The converging train tracks of local government’s financial crisis

The converging train tracks of local government’s financial crisis

🕔02.Jul 2012

It’s the occupational dilemma of the purveyor of alarming news. Tell it straight, with appropriate qualifications, and risk no one noticing? Or big it up, make it apocalyptic, and hope your audience aren’t scared into either disbelief or paralysis?

As was clear from Paul Dale’s report on the Local Government Association conference here at the ICC this week (http://www.thechamberlainfiles.com/councils-face-16-5bn-shortfall-by-2020/), for the LGA it was a no-brainer: go for broke – literally. “Councils ‘face £16.5 billion shortfall’ by 2020. Libraries and leisure centres may disappear to pay for social services, warns LGA” ran Paul’s headline, exaggerating not a jot the Association’s own media release: “Popular council services could be ‘history’ by 2020 – LGA warns”.

Summarising Paul’s own distillation of the LGA’s projections, the assertion is that without urgent radical reform – to adult social care funding and/or to the funding of councils themselves – the money available for everything apart from children’s services and adult care will, within about 10 years, simply run out. Councils would be broke, with nothing left in the kitty for the very services with which we most readily and positively identify them, like libraries, leisure centres, waste collection, and road maintenance.

Given the LGA’s seasonal timing, John McEnroe’s ‘THEY CANNOT BE SERIOUS!!!’ springs irresistibly to mind. The LGA, though, is deadly serious. Its full report comprises a reasonably comprehensive and, if anything, conservative modelling through to 2019/20 of, one the one hand, the future spending demand in nine principal service blocks, and, on the other, all future sources of council revenue (http://www.local.gov.uk/c/document_library/get_file?uuid=c98405b7-b4a6-4b25-aebf-a63b5bcfa5c1&groupId=10171).

These are the ‘lines on the charts’ that the LGA’s media release imaginatively describes, but disappointingly doesn’t illustrate: “the converging train tracks that will carry the most immediate and popular public services into history unless the passengers – government, councils and the voters – draw a new map for organising and funding local public services, and draw it now”.

It’s an interesting word: converging. Properly defined, it means coming together as if to meet, but not necessarily actually meeting, which, certainly with real train tracks and even with lines on graphs, would be more exciting than their not meeting, which is what happens here. Because the LGA’s chief aim is to plot the annually widening funding gap – from £1.4 billion in 2013/14 up to £16.5 billion by 2019/20 – rather than the increasing service demand, the key lines on the most relevant graph not only don’t meet, they actually diverge.

There is another interesting, and pretty, graph showing the relative growth or shrinkage rates of the nine service blocks. It highlights particularly the pressures exerted by predictable demographic change in the case of adult social care, and landfill taxes in the case of environment/waste disposal; also the increasing squeeze on the largely discretionary culture, recreation and sport budgets. But, in the absence of an expenditure line, there is again no actual collision to observe.

I reckon, then, that the LGA missed a trick here. They wanted an apocalypse, and they could have had at least a graphical train crash – easily, as one’s actually been circulating in the local government world for several months now. I refer to the notorious Barnet Graph of Doom.

Barnet London Borough Council produced a short video as part of a budget consultation exercise: not as analytically sophisticated as the LGA’s model, but including a slide based on the same idea. Against the borough’s projected future income, the slide plotted predicted spending on adult social care and on children’s and family services – showing that, without significant changes in the way these services are provided and/or in councils’ funding, the increasing numbers it will be supporting mean that within 10 years it would be providing only social services, there being no money left for anything else. In 2023/24 the budget line duly crashed into the service bars, with maximum visual impact.

Similar as the Barnet and LGA exercises are, their immediate aims are quite distinct. Barnet’s budget consultation was designed to prompt local residents to think about their spending priorities for the immediate and medium-term future – and, no doubt, to concentrate the minds of councillors and officers. The LGA’s projections are directed straight at the Government and its reluctance to act with urgency on the long-term funding of adult social care – in fact, on its own commissioned report.

One of the Coalition Government’s first actions was to ask Andrew Dilnot, a former Director of the Institute for Fiscal Studies, to chair a three-person Commission on the funding of elderly care and report back, with recommendations, within the year. The Commissioners pronounced the current system barely comprehensible, frequently unfair, and urgently in need of reform. Their key recommendations included:
• capping individuals’ lifetime contributions towards their social care costs (excluding accommodation) at around £35,000 – after which they should be eligible for full state support;
• increasing the means-tested threshold, above which people are liable for their full care costs, from £23,250 to £100,000; and
• limiting liability for the costs of accommodation and food paid by people in a care home to £10,000.
The Commission’s full set of proposals, it estimated, would increase public spending by £1.7 billion p.a., rising to £3.6 billion by 2025 – equivalent to 0.25% of the total: “a price well worth paying” to remove people’s fear of having to sell their homes and spend almost all their wealth on care.

In the 51 weeks since the Commission reported, ministers have repeatedly backtracked – labelling its recommendations as merely “a basis for engagement”, calling for more consultation, and delaying a White Paper and, inevitably, any legislation. The LGA’s apocalyptic scenario, therefore, is part of an unusual and desperate cross-party appeal – to ministers primarily, but to the other main party leaders as well – to acknowledge the magnitude of the issue, pull their fingers out, and work urgently with local government in introducing radical Dilnot-type reforms.

Which takes us back to the beginning, and the potential risk involved in the apocalyptic tactic. The LGA’s model builds in numerous assumptions regarding councils’ funding sources and the chief drivers of increased costs and demand in the various service blocks. These include assumptions of future efficiency savings – but, like the other projections, based on past years’ figures and trends. And that’s the problem – that in this instance, it seems to me, weakens both the model itself and perhaps too the message the LGA should be conveying.

All such modelling exercises come with the more or less explicit qualification: ‘unless other things change’. And this time, as the LGA knows better than almost anyone, the scale of spending cuts facing councils is so great that ‘other things’ must change – long, long before 2019/20, and radically. In that sense, the carefully calculated 10-year projections are chimeric. Indeed, the ‘new map for organising and funding local public service’, referred to in the LGA’s media release, is already being sketched out by councils investigating and comparing how to deliver, or ensure delivery of, services in ways that are not just more efficient versions of the past, but genuinely innovative and different. These developments too should get their share of attention at this week’s conference.

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