Sunday, 27 February 2011

Council cuts - Osborne's axe wins Round 1

Osborne's decision to pass onto local councils a large proportion of the unnecessary £80 billion-plus cuts he announced in the CSR is a mark of tactical genius, amid economic incompetence.

It means councillors who stood on manifestos on the same day he was elected, obliged to tear up their commitments to their local communities. It means putting councillors in the invidious role of deciding how to implement huge cuts and then defending their decisions (which will often contradict their manifesto commitments) to their supporters.

And it is predominantly the poorest councils (which are more likely to be Labour) that are suffering the greatest cuts. Of the 33 London boroughs, the 8 suffering the greatest cuts are all Labour-controlled boroughs. Of the ten boroughs with the lightest cuts, 8 of them are Tory-controlled.

Despite the protests and lobbies of many anti-cuts campaigners to resist and defy the cuts, all councils implemented cuts. Many Labour councils take a 'dented shield' approach, preserving 'vital services' as best they can.

The Guardian reported in mid-February that 'Labour councils shed 50% more jobs than Tory areas' which shows both the severity of the cuts inflicted on Labour councils, but also the failure of the 'dented shield'.

A recent survey of local government Finance Directors found 81% looking at cutting public library provision, 76% cutting 'back office' roles like finance, IT and HR, 73% looking at leisure provision cuts, 71% considering scaling back capital budgets and the same percentage looking to privatise council property.

None of these measures will increase local demand or revitalise local economies. They will involve cutting jobs and reducing demand. In the areas where stimulating demand would be most effective (i.e. poorest boroughs) the opposite will happen.

Osborne's cuts across the whole of government, and the strong position of the private sector in holding down pay (weak trade union rights and labour laws combined with high unemployment) mean the economy will sink further.

Capital spending was being cut at national level under Darling's prospectus now embellished by Osborne. But locally now too many councils will cut capital spending - reducing opportunities for both public and private sector job creation.

Osborne front-loaded the cuts to councils - with harsher cuts this year than will follow in years two, three or four. Councillors might be breathing a sigh of relief therefore that next year won't be so bad.

However, that assumes economic growth and increased tax revenue in line with Osborne's predictions (not to mention that the cuts are cumulative, further cuts will be from the 2011 baseline, not 2010). If revenues stagnate or even fall, Osborne will be coming back for further cuts.

No comments: