The context and outlook for public expenditure

Tony TraversLondon School of Economics

The wider public sector and local government

The government’s decision to cut the deficit to zero by 2015-16 will lead to accelerated public spending reductions

80 per cent of the reduction will be achieved by real-terms public spending reductions

IFS = sharpest public spending reduction since 1945?

Local government spending to fall sharply, especially capital

Labour and Conservative Chancellors set plans to cut government capital spending by over 50% by 2014-15

Current expenditure to be protected in some service areas, with will require far deeper cuts elsewhere

Chancellor Osborne has demanded exemplifications of 25% to 40% reductions by 2015-16

June Budget plansODR estimates, based on previous government’s plans £bn - cash

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16Dept Exp Limits 342.7 343.1 341.4 341.2 337.7 340.0

Travers estimates, based on NHS+Overseas Development spending

‘Protected’ exp 110.0 112.8 115.7 118.5 121.4 124.5DEL minus ‘protected 232.7 230.3 225.7 222.7 216.3 215.5

£bn - real DEL minus ‘protected’ - Real terms232.7 227.0 214.7 206.8 195.9 190.5

Local government is all within DEL; Social services are within LG

A broad range of possibilities LG current spending appears likely to

be affected in the following – per annum impacts

A) Labour’s plans, all services treated the sameCash: -0.5% Real terms: -3%

B) June Budget 10 plansCash: -2.5% Real terms: -5%

C) June Budget 10, but with schools etc partly protectedCash: up to -5% Real terms: up to -

7.5%

Social services are not ‘protected’ in any way

Service impacts for ‘unprotected’ services, and others…

Need, from now on, to do far more than immediate responses such as:

Freezing posts; pay freeze; ‘efficiencies’; use of reserves; delays to capital programmes etc

Near-future possibilities likely to include: Decentralised pay bargaining Pay freeze to extend for more than two years Radical re-thinking of need for joint service

provision (LG and other local providers) Essex, Barnet, Suffolk, Lambeth etc radicalism Stopping doing some things? Rise in fees, charges and scope of charging

Developing long term strategic plans to secure adult social services’ survival

Clear and present need to work with other local services to secure the future of adult services

Thinking previously-difficult things, eg: Could social services move (in part) to semi-

independent status? Might more volunteers have to be used to

supplement staffing? How far can adult social services be co-located

in other public service buildings? Sales of assets to re-use them to ensure capital

development

Determining what is to be expected of local public services in the future

Can existing service patterns and providers be maintained?

Can services be co-located? Can more provision be ‘out-sourced’? Can the ‘Big Society’ deliver

anything? Councils and other service providers

may see a move to a single local budget of some kind

Securing the future Speed of reaction will be of the essence From this autumn, change will occur rapidly

within town and county halls Need to secure the objectives of the service

within different buildings, structures and, possibly, with different people

Public tolerance will be tested by cuts in expenditure

However, adult social service will continue to exist – but they will inevitably change

The context and outlook for public expenditure

Tony TraversLondon School of Economics