Magazine article Public Finance

Not So Tough at the Top

Magazine article Public Finance

Not So Tough at the Top

Article excerpt

Invoking yet again the late environment secretary Anthony Crosland's warning to the nation in 1975, one of the larger management consultancies specialising in local government cautioned this week: The party is finally over.'

With the chancellor telling the public sector in his Pre-Budget Report to make additional efficiency savings of £5bn by 2010/11 - on top of £30bn already demanded - it certainly has a point.

But the circumstances are very different to the International Monetary Fund crisis 33 years ago when Crosland preceded his famous line by calmly telling the nation: The crisis that faces us is infinitely more serious than any of the crises we have faced over the past 20 years.'

Then there was no unprecedented collapse of the banking system in a global financial crisis that had not been experienced in living memory. Public spending in 1975, which had reached unsustainable levels - although a pale imitation of today's mounting public debt - had merely to be slashed.

Now, on top of public sector efficiency savings, public spending will rise at an annual rate of only 1.1% after 2010/11, conveniently following the next general election.

We have already had the ritual, autumnal howls from the Local Government Association: dire warnings that councils will have to find £1bn worth of savings over three years to avoid forced cuts.

But local government minister John Healey insists there's no need for either service cuts or 'excessive' council tax rises - and in this harsh financial climate you can be sure he will insist on near-zero increases over the next few weeks.

In short, local government could soon find it has few friends. Put aside the findings of a survey this week by the insurer Liverpool Victoria Friendly Society that shows high levels of dissatisfaction with local services and concerns about council tax.

Consider, instead, last week's figures from the Department for Communities and Local Government, showing that the level of cash in council reserves has more than doubled in 11 years to £12.56bn.

Town halls - and big quangos - need to watch their backs. With the basic salaries of council chief executives rising by 34% between 2003/04 and 2007/08, according to Audit Commission research, the public sector 'fat cat' label is beginning to stick.

As the impact of the recession, redundancies and all, bites deeper into household finances, generous public sector salaries will become harder to defend and sustain.

As the commission has noted, the focus on an increasingly narrow band of chief executive candidates has increased the market value of the top town hall posts, with few - if any well-qualified people from outside the sector entering councils at the highest echelons of management. …

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