Wednesday, 27 May 2015

Camden's cuts challenge - Post 11 - after the 2015 election

Here's a short note outlining an initial view of future spending cuts from central government on Camden - in the light of the Queen’s speech and the post-election new budget.  (General information on the cuts and decisions taken so far is set out on the council website).

Revenue funding for services
It remains very difficult to predict the level of funding cuts for local authorities until the Conservative government sets out a Spending Review – which is expected at some point over the next few months. There will be a ‘stability budget’ on 8 July setting out how manifesto commitments will be funded and further cuts to public spending, including large welfare cuts.

Budget 2015 projections were slightly worse than the Budget 2014 projections from which we anticipated that we would require £70m of reductions over the 3 years to 2017/18 and a further £20m of reductions in 2018/19 and therefore remain an indicator that the savings requirement will be at least as high as that already anticipated.

It is difficult to derive precise departmental spending estimates from the commitments in the Conservative manifesto, or to know whether these would be a reliable indicator of any future settlement.  However, the Institute for Fiscal Studies noted that the Conservatives planned more significant spending cuts up to 2018/19 than the other major parties and would deliver them more quickly.

Cuts to schools
There are particular concerns in education funding, where a commitment to ‘equalise’ spend across the country could lead to cash freezes for schools (until other areas catch up) with the possibility of major cuts to high needs and early years spending should the government adopt a formula-led approach to redistribution.  In order to deal with extra cuts here and continue our investment in under-5s, funding for other discretionary services (e.g. street cleaning, voluntary sector, sports, youth work) will come under further pressure. 

It will therefore be important to keep sight of the ‘savings under development’ in the December finance report (£5m) and it may be necessary to revisit the cuts not put forward earlier this year at relatively short notice should the outcome of a Spending Review - or the announcement of the July budget require this.  

Further discussions may be needed to challenge which services and outcomes are prioritised and how they are delivered.

Capital funding of public infrastructure, homes and schools
Our capital programme stands at £1.2bn, but only 6.6% of this funding requirement is met from Government grants.  The lion-share of investment comes from our own self-financed Community Investment Programmeclick here for updates on what we are building in your area.  

There is no indication that the government will reverse its stance on the cuts to capital funding introduced in 2010. Therefore, except from distinct and ad-hoc grants such as from the GLA for Better Homes repairs work, the Council will continue to rely on generating its own resources to fund the vast majority of its capital programme (both regeneration and essential backlog maintenance) – primarily through the disposal of surplus or under-utilised assets and especially from the receipts generated through Community Investment Programme regeneration schemes.

Assets that are allowing the Council to self-finance the Community Investment Programme can only be utilised once – whether this be a disposal or the regeneration of land to create new homes and community facilities – and therefore more difficult decisions may be required to provide the resources we need to meet the Camden Plan.  Rising labour and material costs in the construction industry are already putting a strain on budgets and have led to difficulties in attracting the right calibre and quantity of tenders during procurement. With some live projects we are considering options such as re-profiling or merging phases to offset the increasing costs and come in on budget.  

Forced sale of council homes in ‘expensive areas’
The proposed housing association right-to-buy funded through sales of empty council homes in ‘expensive areas’ poses a fundamental risk to the Community Investment Programme’s aim to build 1400 new council and intermediate homes in the coming years. Changes to housing association funding signal uncertainty with social house building in general. The detail of how the manifesto pledge will be implemented by the government will be very important for our housing plans.       

More difficult choices
For a sustainable capital strategy that’s able to withstand a further five years of austerity, choices that may have been unpalatable in the past may increasingly need to be considered as part of the evolution and development of the Programme. For example, the balance between future repairs investment vs redevelopment on housing estates may change; further emphasis may be needed to invest in schemes which raise revenue; projects currently at master-plan stage could be subject to challenge and reallocation of resources if necessary; funding options such as selling some blocks in advance may be considered in to manage cash flow and risk; and further capital may be needed from projects, something which has proved challenging in our party (e.g. the £3m extra receipt from Liddell Road).  


In short, the new financial situation will require some difficult discussions about what we choose to fund and considerable innovation and fresh ideas on how we run public services over the next few years.

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