It’s the time of year where evenings are drawing in, Christmas shopping has commenced (if you’re super organised!)……and councils are working in earnest to develop their proposals for achieving a balanced budget in 21/22 through the annual business planning cycle.
However, as we all know, that’s about as far as the normalcy goes. This year’s cycle is shaping up to be the most challenging in a generation, as a result of Covid adding huge pressures on top of the effects of austerity. We have already seen the first casualty with Croydon declaring a s114 notice yesterday, the first since Northamptonshire in 2018; the signs are it won’t be the last unless others make severe cuts to services. Indeed, today’s news from the County Councils Network (CCN) is that only 22% of its members are confident of delivering a balanced budget in 21/22 without dramatic service reductions.
Historically, councils have been able to balance the books, even during the recent years of austerity – so why has it suddenly become so much more challenging? There are four main reasons:
- Greater scale: the sheer scale and duration of the Covid crisis has had a widespread financial impact through lost income, increasing demand, and negative effects on local economies, businesses and markets
- Quicker pace: there is a need to identify savings to address an in-year and year one challenge – savings now need to be weighted for earlier delivery
- Increased uncertainty: there is potential for great variation in key assumptions, a lack of clarity on funding, and a potential range of scenarios relating to the severity and duration of the pandemic
- Competition for focus: there is variation in councils’ ability to draw attention and ownership to business planning when some areas are still in an emergency response phase.
Inevitably, the financial gaps and pressures that are emerging this year are even more significant than those seen previously. To address the gaps and balance the budget, councils are gravitating towards four of the levers they can pull:
- External funding – increased government funding and longer-term sustainable funding formulas
- Income generation – increasing council tax, income and charges
- Efficiencies and spending reduction
- Transformation – focusing not just on service redesign, but deploying strategies to more effectively manage demand
However, none of these are ‘standalone’ levers. Pulling one impacts another – for instance, it would be difficult to credibly lobby the government for funding or justify a rise of council tax unless you were 100% percent confident that other efficiency and transformation avenues are being pursued or have been exhausted.
It’s also easy to be drawn towards cutting prevention and early intervention services (which are typically not statutory), but these are short term fixes which will more likely lead to poorer outcomes for residents, and increased costs down the track. It is therefore extremely concerning that the CCN survey reports that a third of its members are planning moderate or severe cuts to their preventative children’s services.
No one underestimates the scale of the financial challenge councils are facing but one way to identify any remaining opportunities is through making use of the IMPOWER Index. The Index helps councils reframe what ‘good’ looks like for them, by looking at the outcomes they achieve per pound invested. It offers a tangible first step towards understanding the art of the possible, how better outcomes can cost less – and how to look ahead, not back. Do get in touch if you’d like to discuss how the Index could help you.