Spotlight: How to set a council budget in a financial storm

Future of London occasionally posts Spotlight features from guests, but we haven’t yet published anything by an elected member. This article, written by LB Harrow councillor Adam Swersky in late November 2016, is the first exception, shared with you because he’s written pretty eloquently about local authority staff and councillors having to navigate budget cuts. Not the most cheerful of posts, but a reminder that in trying to serve Londoners – especially those in need – with diminishing resources, everyone’s in the same boat – LT.

This week, the London Borough of Harrow will publish its draft budget. It will describe how the council intends to spend more than half a billion pounds of public money, covering everything from housing benefit payments to school funding, children and adult’s social care to recycling collections.

It will be our toughest budget in nearly two decades.

I took on the role as the political lead for finance earlier this year, so it’s been my responsibility to get this budget over the line at a time of terrifying cuts. This is my attempt to share the experience of one local council of setting a budget in the middle of a financial hurricane.

Not a party conversation…

I discovered shortly after being elected in May 2014 that becoming a councillor catapults you into the small and unsurprisingly unpopular species of people who can’t resist the urge to talk about local government at parties.

Yet as former US House Speaker Tip O’Neill said: “All politics is local”. The things that matter most to people on a daily basis are, nine times out of 10, the prerogative of officials sitting in the local town hall, not civil servants in Whitehall.

The extraordinary breadth of councils’ responsibilities is a well-kept secret, and one that is further confounded by the classically “organic” structure of local government across the UK.

In your typical London borough, the local Civic Centre will take charge of adult’s and children’s social care; services for schools; children’s centres and nursery provision; special educational needs; libraries, local cultural, sport and art facilities; council housing; support for families who become homeless; public health, including drug and alcohol services and health visiting; parking controls and some road management and repairs; parks, open spaces and trees; street cleaning; planning and licensing; trading standards and food hygiene; and running elections.

And, of course, bins.

Many of these services are “statutory”, meaning that councils have a legal obligation to provide them. Councils can, and regularly are, taken to court if people believe they have not fulfilled their duties to the required standard.

But beyond these core activities, many councils put in place additional, discretionary services to address local needs around issues like domestic abuse, loneliness and isolation, youth and long-term unemployment, and the need for advice and guidance on, for example, welfare, housing, and debt. These services are often delivered by local voluntary sector organisations, using volunteers and extra grant and donation income to deliver added impact.

It’s all about the money, money, money

Traditionally, councils have paid for this parade of provisions through a combination of local council tax and a central government grant. In the past couple of years, local authorities have also been able to retain up to 50% of the increase in any local business rates collected — a component that will become dramatically more important by the end of this parliament.

It’s a system that’s never worked perfectly. Central government has never fully trusted councils to spend money on the “right” things — so tied them up in knots to make sure funding went to Whitehall’s favoured projects. On the other side, local taxpayers have always assumed their council tax largely pays for bins and streets and are perpetually perplexed about why it seems to cost so much. (Environmental services make just 10% of the total budget in Harrow while protecting vulnerable children and caring for the elderly takes 2/3 of our total spend).

However poorly it worked in the past, the system is now falling apart, subject to deep and prolonged attack on three fronts.

First, local government — considered a soft target — has been hit hardest by austerity. Central government grants to councils fell 36% from 2010–2015. Last year’s Spending Review envisaged more swingeing cuts to come. Core government grants could fall by 60% this parliament.

For Harrow, that means our main government grant is set to fall from £32m in 2015/16 to around £1m in 2019/20, a 93% reduction. If we stopped collecting bins and cleaning streets, switched off the street lights, and closed every library, we would get nowhere near the savings we need to make to plug the gap.

And while government cuts our funding, they also block our ability to raise revenues. Council tax increases are capped below 2% per year (plus 2% for the new adult social care precept) without express public approval in an expensive local referendum. Council tax impacts low-income households, so it’s hardly an ideal way to raise money — but when the alternative is slashing services for elderly with critical needs or people at risk of domestic violence, tax-raising powers are a necessary last resort.

That’s not where it ends. While councils’ cash positions deteriorate, our responsibilities grow. Over the past few years, councils have faced new legal duties around adult social care and public health, a forensic Ofsted-led children’s services inspection regime, and rising costs for everything from disposal of recycled waste to social care placements.

In Harrow, our population is growing at both ends. That means we need more school places for children, and we have more children and adults who need the attention of our social work teams. We are also bearing the brunt of the government’s welfare reform agenda.

Welfare cuts, many of which have fallen on people in work, have led to a four-fold rise in the number of families, many with children, turning up at the Civic Centre late at night with all their possessions stuffed into suitcases or wrapped up in black bags after being evicted from their homes. That’s something no family should have to experience.

In total, over our four year term in office, the impact of all of the above will force us to make about £83 million of cuts — gob-smackingly, that’s around half the spend we directly control.

Harrow Budget 2017

It’s extraordinary in many ways how well councils have managed this scale of challenge. While central government departments consistently miss targets — George Osborne’s welfare cap has been exceeded pretty much since the day it was set — local authorities have a legal requirement to balance their budgets every year. And we do.

But it gets harder and harder. Like many authorities, Harrow has closed some libraries and children’s centres. We’ve cut services that residents valued, like night-time noise control. And we’re proposing to end things that will hurt people down the road, like our smoking cessation service. No one thinks it’s a good idea to do this. We just have no other choice.

So what does that mean for this week’s budget — our hardest yet?

First, we have to accept the context. When we are forced to make savings of nearly £20 million for a third year running, we know the budget is going to take the axe to services that a Labour council wouldn’t touch in its worst nightmares.

Despite this, we start with a commitment to competence and rigour. We will balance the budget, as we have done every year, and we will do so responsibly, preserving our meagre reserves and disposing of assets only when it makes sense to do so.

We have been ruthless in our pursuit of efficiency. We’ve saved £700k on print costs, £1 million in management costs, and nearly half a million on communications. We’ve tightened our use of agency staffing, cut back on training and events, and driven hard bargains with our external contractors.

Six years ago, efficiency savings delivered millions. Now we’re scraping the bottom of the barrel — a bit of better purchasing here; a management saving there. We can no longer rely on efficiency alone to balance the books.

So we’re taking it a step further by pushing hard to find creative solutions to our challenges. Where services are scaled back, like our children’s early intervention service, we redesign them to make better use of the limited funds.

In other areas, we’re aggressively embarking on a commercialisation programme to bring in new income. Our commercial services site boasts 11 different services, with more to come, from trade waste to training, gardening to on-location filming.

Our social care team has pioneered a globally significant new way to allow adults to choose their own care — the first council in the country to do so. We’re now partnering with IBM to co-develop the technology as part of their Watson programme. We have ambitious plans to spread it to millions of people worldwide to give them the tools to make their own decisions on how to better meet their health and social care needs.

We’re developing centres of excellence in our back office functions. Our HB Public Law service is the largest Local Authority legal practice in the country, servicing five authorities with 150 in-house lawyers. We get our HR from Buckinghamshire, and provide procurement services to Brent. And there’s lots more to come.

This week’s budget will have plenty to say about some of the truly incredible opportunities for us to be more creative and commercial — and about how we’ll use those opportunities for the benefit of Harrow’s residents.

All eyes on the future

With enormous cuts to make each year, and rising pressures on our services, it’s easy to focus on the here and now. But the job of politics is to pave the way for a better future.

Councils have a unique ability to develop the character and environment of their areas. We have the technical powers through planning and licensing; the capability and expertise with our business, property, and economic development teams; and the opportunity to set out a vision that people can come together around.

In Harrow, we made a decision two years ago to kick-start a major regeneration programme. The aim was not only to bring in up to £1.7 billion of investment into the borough, building thousands of new homes and new public spaces by replacing dilapidated and unused sites. It also created a new capability in the council to lead world-class regeneration projects.

We now have one of the best regeneration teams in London, a group of outstanding designers, planners, and developers who will help us build not only for profit — and we will make a profit to plough back in to council services — but for quality, creating new, inclusive, strong communities in the process.

The road grows rockier

There is a yawning gap between perceptions about local councils — stodgy, staid, wasteful — and some of the quite extraordinary things staff are achieving, on a par with the best in the private sector. At the toughest of times, we’re responding with creativity, innovation, and dogged resilience.

But the truth is that there are only so many more artful ways we can get through 8-figure sized year on year cuts to our funding.

Once you strip away some of the icing on the cake, like providing a decent library service, most of what councils do either saves lives (through our care for vulnerable children and adults) or strikes at the heart of how people feel about the area they live in.

If councils are forced into endless retreat, in the next few years there will be nothing to help elderly people stay at home when they’re discharged from hospital; nothing to support low-income families stay in their homes and provide stability to their children; nowhere for young mothers to get help on how to give their kids the best start in life. Our parks will wither. Our streets will decay. And the quality of our public life, the life we lead when we leave our homes and gather in our communities, will crumble.

The government may feel they’ve pulled a fancy trick. They get their cuts while local councillors take the blame.

But the character of our country is as much about the pavement at the end of our drive as it is about our stance on Syria. If the local falls apart, the national won’t take long to follow.

Adam Swersky is a councillor in the London Borough of Harrow and cabinet member for Finance and Commercialisation.

Note: The Local Government Association says the funding gap for councils will be £5.8 billion by 2020.