The future of local government, Rob Whiteman, LGC Summit 2013
the future of local government
Chief Executive, CIPFA
1 Macroeconomic and fiscal summary
2 Local government resources
3 Policy changes affect local government – but how?
• Increase in confidence in the outlook for the UK economy
• National Institute of Economic and Social Research - GDP growth
0.9% in 3 months to end of August 2013, up from 0.7% in 3
months to July.
• OBR now predicting growth of 1.8% in 2014
• However we should exercise some caution
– 2013 forecast cut from 1.2% to 0.6% in one forecasting period
– Revision of depth of 2008/09 recession from 6.3% to 7.2%
– UK economy will now only regain its pre-crisis peak in 2015
– Result is a much higher hill to climb to recover from the damage of
the financial crisis
1 The macro picture – through a dark glass
We have all now operated in the context of large scale cuts and
„austerity‟ for a few years now
Cuts to DEL and the impact of automatic stabilisers mean pre-crisis
DEL/AME split of 60% DEL vs. 40% AME has now shifted to a 50/50
Government has responded with AME cap from 2015
Certain parts of AME protected and some aspects beyond Government
― Debt payments and public sector pension liability beyond control
― Some social security protected – eg: JSA & basic state pension
Further cuts to DEL needed before cap has an effect
So austerity will have to continue….
UK Government response – is first cut the deepest?
Government debt – Are we alone and the economy overall?
General government gross financial
liabilities as a percentage of GDP
Euro area (15
Source : OECD
UK Government Debt – It‟s a risky business
2012-13 2013-14 2014-15 2015-16 2016-17
Projected increase in debt interest
spending from a ppt increase in gilt rates
Source : IFS
As part of continuing austerity programme the Chancellor has
announced further spending cuts in 2015/16
Cumulative cut in DEL of around 10.3% over 5 years
Cuts in 2015/16 in line with SR 2010 departmental priorities
Protection for some (Health, Education and International Development)
means deep cuts for others
CLG and FCO over 50% cut to DEL by 2015/16
Austerity likely to last well beyond 2015/16
Assuming no tax increases or cuts to AME would mean further cuts to
DEL in 2016/17 & 2017/18
IFS estimate that in this scenario would mean another likely 7.9% cut
Spending in 2015/16 and beyond – after the end of the
Longer term financial sustainability remains a problem...
Specific measures announced at the SR will have large impact upon
local government funding
Continuation of freeze grant puts additional pressure on councils to cut
Freeze over long period will see value of council tax eroded and vital
stream of funding for local councils dwindle
Changes to social rents likely to become another pressure on local
PAC Committee - ““To date, councils have, as a whole, managed to
cope, but with reductions likely to continue for several years, the
pressures on the sector are set to increase”
Spending reductions were falling hardest on councils with the highest
deprivation, and that some might cease to be viable
2 Local Government – the devil in the detail
CIPFA CFO Survey – Risks to Budget
63% of CFOs less confident about delivery of 2014/15 compared
to savings to date
3 Austerity and Beyond - Questions
Citizen and the State
– Community Workers?
– A drop in the Ocean?
– Sharing alike?
– Two tiers?
– Guided localism from the
– Beggar thy neighbour?
– Letting go?
– Do we know what is spent
– Councils, PCCs, CCGs,
academies – how will they
measure policy interventions?