Saturday 17 November 2012

Small or large, it’s not a good time to be an outlier


This week, within hours of each other, two very different local authorities announced causes for concern about their future financial viability.

West Somerset (know to many from childhood holidays at Minehead) is the smallest District in England in terms of budget and population.  This week the Council published an LGA report that showed that its unavoidable annual budget growth bill of £150,000 dwarfs the maximum it can raise by increasing Council Tax in line with the 2% cap, which is just shy of £40,000.   With grants shrinking this is an arithmetical bind from which there is no escape and all the Council can do, the report acknowledges, is seek to put off the day when it holds up its hands and tells the world it can no longer meet its statutory obligations.   

Birmingham, on the other hand, is England’s largest unitary authority, with a population about 30 times larger than West Somerset.   Its problem is that it has to set aside at least half a billion pounds – and probably more- to cover equal pay claims from some of its women workers, backdated for several years.  Arguably the scale of Birmingham’s operations have contributed to the extent it unwittingly breached the Equal Pay Act.   There is much more Birmingham can do to balance the books than West Somerset can, but unless it is allowed to capitalise current these liabilities , it will have to find considerable additional savings this year on top of those brought about through austerity. 

As readers will know,  Chubby Cat frowns upon public sector bodies putting off for tomorrow what it should really be paying for today (or yesterday), but in this case the effect on current service users of mistakes made in the past would be very unfair unless the cost is managed over a longer period.

Part of the problem, of course, is the local government finance system does not deal very well with authorities at the extremes,   It is difficult to devise a system that doesn’t result in outlier authorities ending up with either too little or too much.     When the pieces of the system are being thrown up into the air,  as they are at the moment, the risks for organisations multiply.  From next year, market factors will decide some of the distribution of funding between local authorities and the system will become less easy to manage.  

Only the week before last an elected Member expressed to me his concern that more than one local authority would go bust as a result of austerity,  I intend to return to this issue in the future,  in particular the question of what happens next if such an eventuality arises. 

In the meantime it is enough to note that perhaps at the moment it is best to be medium sized. 

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