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Spending Cuts – the effects on Rochford District

June 1, 2010 by  

The only place you can read about Council Tax and Council Finances in detail is in the Council’s own newspaper (online and paper) “Rochford District Matters” which is obviously not an independent commentary.

Given the lead of the new Coalition Government which will “impose tougher rules to stop unfair competition by local authority newspapers” I have decided as an independent district councillor and independent internet publisher to present an update article on the issues that I think that residents will find  impacting on them as a result of The Spending Cuts.

 “Cuts don’t have to hit frontline services” says Eric Pickles, Secretary of State for Communities and Local Government.

Mr Pickles was speaking just days after local authorities learned they must find £1.2bn of savings within months, as part of the £6.2bn of immediate cuts unveiled by the Coalition Government.

In addition the Coalition Government  has said “We will freeze Council Tax in England for at least one year, and seek to freeze it for a further year, in partnership with local authorities”

Is this Good News for Rochford?

At the time of the 2009 County Council Elections I had a leaflet through my door which had been prepared by the Conservative Party centrally.

David Cameron said in the leaflet “We’ve got plans to help people through this recession – like a council tax freeze.”

The question I asked then was “But will they do it?”

Well the Conservative Administration at RDC did not but did apply an increase of 1.96% in April 2010 which had been the lowest for many years.

But the Coalition Government has now published “We will freeze Council Tax in England for at least one year, and seek to freeze it for a further year, in partnership with local authorities.”

Last year I asked the Officer at RDC in charge of Finance to set out for me the effect of a 0% increase in council tax for a single year.

Although the following figures were a projection based on the forthcoming 2010/11 municipal year I believe that this will give residents a flavour of what effect such income capping and spending cuts will undoubtedly have on our lives as residents of Rochford District.

My professional, qualified, background is in finance having been a divisional senior bank manager for 33 years with 22 years of that in the City.

What you may not realise is that just a single year of a zero council tax increase is something that could generate a multiple figure over 5 years which is the extent of RDC Forecasting. As I said these figures were supplied to me by the Head of Finance at RDC last year (2009).

A 0% increase in RDC’s council tax for just a single year could mean a reduction in income of about £300k, which over the 5 years of the MTFS (medium term financial strategy), could accumulate to £1.3m, even if council tax rises went back up to just 5% in the next year.

So just one year at 0% and not taking account of zero increases in Government Grant or even reductions is significant right away with the effects stretching long into the future.

Remember it was also  announced this week that “local authorities learned they must additionally find £1.2bn of savings within months, as part of the £6.2bn of immediate cuts unveiled by the Coalition Government”.

There will obviously have to be political decisions about how the Council will deal with the reduced income with decisions about reductions to services or ways to generate additional income.

Watch out here for the financial incentives to be promoted in the Conservative Green Paper on Planning where Council’s will get extra income from house building.  Will financial constraints give the Administration no choice but to stick with the Labour Housing Targets for financial survival?  Is this what you want?

Inflation. Normally both expenditure and income would be expected to rise by inflation.  But with just expenditure rising by inflation alongside a 0% council tax, the continued downturn in some of the Council’s main income streams, such as planning/land charges and investment income (interest on cash deposits) will also continue to put even greater pressure on the Council’s budget.

Apparently the majority of the Counci’s contracts, such as IT, Grounds Maintenance etc, have annual rises linked to the current inflation index (ie., RPI).

In the Yellow Advertiser (2009) it was reported “Since 2007, the council’s income from investments, building control fees, planning, parking fees and permits and land searches has reduced by almost £1m per year.”

The response from the Council was “Council bosses believe overall annual expenditure will decrease by £1.5million by 2012 by reviewing services, income and contract arrangements.”

 But that might not be enough to cover reductions in income, inflation on expenditure, and loss of income due to a council tax increase freeze for 2 years.  
 
The future position on salary rises is also going to be critical where salaries account for around £6m of the Council’s net expenditure of £13m.

On this the Coalition has said “We will give councillors the power to vote on large salary packages for unelected council officials.”

If you want to get an idea how much the Chief Executive of RDC earns take a look at this Echo article from 2009. (http://www.echo-news.co.uk/news/local_news/southend/4290667.Special_investigation__Just_how_much_do_our_council_chiefs_earn_/)

Another major issue for the Council is the triennial pension revaluation, due in 2011 which has financial deficit issues that are mind boggling. (Luckily the new Cabinet Member at RDC for Finance & Resources  is said to be something of  a City Expert. But I hope that he is also a member of the Magic Circle because he will need that Wand.)

Verdict

There is evidence of reductions in income from a wide number of sources some of which are systematically cumulative, contracted inflation increases on major outsourced services, salaries that may now be unsustainable, downsizing options that are financially problematic and a huge liability for pensions that cannot be met.   

My independent view is that there will have to be service cuts and price increases on many front line services.

But you will be able to track what is going on from your electronic desktop because the Coalition now requires all local council spending over £500 to be published online.

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