Councils must think bigger and act quicker to reduce costs, or funding cuts will cause more damage to services and jobs than necessary, the stark warning in Surviving the Crunch, a report published on 23 March by the Audit Commission, tracing the effects of the economic downturn on council services.
It says most councils have been cushioned from the worst of the recession because the government stuck to its three-year funding settlement. But this ends in 2011. On average, councils receive two-thirds of their income from grants.
Even though the timing and extent of cuts in government support are unclear, the report says that councils must prepare now for leaner times. The sooner they get clarity the better. The best-prepared councils are taking action now to preserve services in the years ahead, but others have yet to make any financial plans beyond 2011.
Conclusions include:
* The financial impact of the recession has been manageable for most councils up to January 2010, but some councils, often districts, have been hit hard by falling local income.
* The future for local government finances is challenging, though there is little clarity about the size of any public spending cuts.
* Councils should be responding now to minimise the impact on frontline services.
* Most councils are making some savings and planning more, but the quality of planning is variable.
* Public sector job cuts could damage local economies. All options for reducing the pay bill should be considered.
Recommendations include:
Councils should:
* prepare now for the leaner times ahead
* ensure that members and officers provide strong leadership over difficult resource allocation decisions
* consider all options for managing pay bills, not only staff cuts.
Government should:
* provide early clarity on expected future levels of council, police, fire, health and education funding to enable effective forward planning
* recognise the uncertainty around the future financing of regeneration, sustainable communities and affordable housing strategies in current market conditions, and consider alternative funding models
