The Spending Review – what does it mean for local government?

In his Spending Review statement, George Osborne appears to have started the process of reversing central governments’ hold over local government. Local financial accountability cannot be achieved when so much of local government’s income is determined, capped or controlled by Whitehall.

Over the Spending Review period central government’s direct funding of local government will fall by 24% in real terms, but as a result of the ability to raise and retain taxes locally the net impact is likely to be a forecast reduction in net real terms of 6.7%. This only starts to redress the accountability balance and overall, statistics like this tend to down play the impact the announcements will have in certain individual local authorities. However, as the Local Government Association has recognised, the announcements do go some way to providing the flexibility for local government to raise some of the additional money they need.

Whilst 6.7% may be a smaller reduction than the last savage cuts of the 2010 Spending Review, further reductions of even this size will be challenging, particularly with ever increasing social care costs and with most of the easy savings wins already taken.

The devil is also in the detail of the announcements. The Chancellor indicated that additional responsibilities will be devolved to local authorities over the next few years e.g. transferring funding responsibility for housing benefit administration for pensioners and current public health responsibilities. These new areas of responsibility will be consulted on, but there was no indication of whether additional funding would be provided. 

So a cautious but wary welcome to the moves to strengthen local democracy and accountability is probably the right response from local government.  But, the need to transform, to innovate, to plan smarter and initiate changes in the way people work, whilst maintaining service quality to and accountability with the taxpayer remain as strong as ever.