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Spending review: is there a silver lining?



Gruelling settlement will leave local authorities with no alternative to innovation, but it may be too late

Just after prime minister’s question time tomorrow, the speaker of the House of Commons will call Chancellor George Osborne to give his autumn statement and spending review. With the government committed to plugging the deficit - expected to be £70bn this year - by 2019-20, while honouring promises on the NHS, schools and overseas aid, local government can expect a gruelling settlement.

Spending on local authorities, justice and non-school education is expected to fall by 30% over the review.

One source of funds to be tapped is privatisation. Unless Osborne can find an unexpected rabbit in his hat, he will have to carry through the sell-offs of Ordnance Survey and at least parts of the Meteorological Office in the face of trenchant expert opposition. Likewise Land Registry of England and Wales, where the Treasury has appointed investment bank Rothschild to investigate sell-off options after last year’s abortive exercise.

Receipts from asset sales will go straight to the Treasury.

Emerging crisis

For local government, the main measure to soften the blow looks like being a new power to levy a 2% ‘social care precept’ in council tax to tackle the emerging crisis in funding social care. According to the Local Government Association, the gap between demand and available funds is growing by at least £700m a year.

No one pretends the few billion that will trickle in will come close to filling the gap. Even without the spending review, the LGA is projecting that by 2019/20 councils will face a combined annual funding gap of £14.4bn. With discretionary services already cut to the bone, the only option left is genuinely radical thinking.

IT services vendors will no doubt be ready with investment ideas, but savings from IT based transformations and making use of big data take years to filter through. Councils do not have years. The only option left is ruthless commercial thinking - to sell off all unnecessary property and fall back on statutory duties supported by trading activities. But as thinktank Localis commented in its “Commercial councils” report earlier this year, if commercialism in councils is to succeed, it has to be seen as a positive development, rather than a reluctant reaction to austerity. 


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