Britain can’t keep living in a dream world, wanting Swedish levels of public services with American levels of tax.
That was the core message from Newgate Communications’ latest “The View from the Bridge” debate which asked what impact the Spending Review’s £11.5 billion in cuts will have on UK Plc and local authorities.
The unsurprising answer was “actually, quite a lot”.
The excellent panel (chaired by NLGN’s Simon Parker and featuring Prof. Tony Travers from the LSE, Paul Cleal from PwC and Cllr Joe Goldberg from Haringey Council) agreed that local authorities hadn’t yet seen the worse of the cuts.
In fact by 2020 the panel predicted that local authorities would see their budgets cut to the equivalent of 50% of their pre-banking crisis levels.
In real-money terms that means less social services, arts and leisure budgets being slashed and local authorities having to assign large service areas to private and third sector contractors – with users having to pay for services they previously would have got ‘for free’.
But the alternative is even less appetising. Without radical reform in the way local authorities work and the role played by communities, charities and business in the provision of social and community services, then significant tax increases are the only option.
The panel warned that even ring-fenced services like education and the NHS would be likely to see real-term cuts, with the current 4% year-on-year increase in NHS operating costs set to increase substantially due to the pressures of an aging population, yet a static budget likely to force hospitals to endure the radical cost-cutting and partnership working that councils have already been forced to pioneer. The panel predicted that local authorities could move out of providing education services entirely.
Yet despite the gloom, opportunities are emerging for a new approach to the delivery of public services, which will see more services provided by business and charities and by community volunteers.
While paying for services that were previously free won’t be without controversy, the concept of universal service provision while maintaining relatively low personal taxes is akin to a country living in a fool’s paradise.
Tony Travers and Paul Cleal estimated that taxes raise the equivalent of 38% of GDP yet spending accounts for 45% – the gap is clear to see.
The panel also noted that there has been a paradigm shift in public opinion around universal services – with the recession resulting in a greater sense of self-reliance and an acceptance among many (particularly younger people) that they don’t want to pay council tax for a range of services they don’t use. Paying for some services that previously would have been provided by the State or council is no longer the barrier that it once was.
While local authorities were praised for having grasped the nettle and driven innovation in the way services are delivered, many have yet to address the full scale of the spending cuts needed to balance the books.
The end result will see a rebalancing of service provision between state, local authorities and private and third sector companies. The debate now will shift to which services are ‘sacred’ and which will move to a paid-for model, or drop out of local authority control all together. This brings new opportunities for business – and for local authorities to make a virtue out of the need for spending cuts to transfer provision to third and private sector organisations and use this as a vehicle to help drive economic growth in their districts.
While working more closely with the private sector will be a reality for many councils, the way these partnerships are structured will change, with the ten year plus contracts that currently exist, no longer fitting the requirements of local authorities which are looking for more flexible relationships and a sharing of risk (and profit) with private sector partners.
Whatever the final outcome, local authorities will be ‘steering, not rowing’ service provision in the future. It’s the beginning of a new model for local government, and a new opportunity for the private sector to help deliver more for less.
Watch “The View from the Bridge Here” – bit.ly/1ac24LB