My South London Press Column, 27/02/2015

Next time you are talking about the issues of the day with family or friends see how they react if you say that you are deeply concerned that our system of Local Government Finance is deeply flawed and that something should be done about it. They will probably give you a quizzical look and turn the conversation to the outrageous behaviour of bankers in not paying taxes or whether Millwall can escape relegation.

Now try talking to them about cuts to social care, local libraries or the number of potholes in the roads and everyone will have something to say and often a personal experience to share.

But it is that system of Local Government Finance that is causing councils around the country to make the most difficult cuts they have known. I will spare SLP readers an explanation of how that system works but there are two things that are financed separately. Funding for Schools is ring fenced and most spending on Housing comes out of income from rents. Everything else comes out of one pot – most of which is controlled by the government in Westminster.

So what about Council Tax? Councils do raise funds locally through Council Tax of course but it doesn’t automatically rise with inflation and is effectively capped by the government. What this means for us in Lewisham is that the funds we have available have shrunk dramatically.

Since 2010 each year has seen significant cuts in the resources we have, and by 2014 we had reduced Council spending by £97m – much of that was done by finding better, more efficient ways to do things but we also cut staff numbers by 31% while we tried to protect those services which helped the most vulnerable of our fellow citizens.

There is one other thing that you need to know about all the things we provide – what we spend on them isn’t equally divided. More than half of what we spend goes on care for the elderly, the vulnerable and the very young. Next year that will total something like £130m in Lewisham, leaving about the same amount to pay for everything else. To balance the books this year we need to reduce spending by almost £40m – with another £45 required over the next two years.

Finding a way to do that without making a real cut in something that you may care deeply about isn’t possible, so forgive me if the next time we meet I too turn the conversation to the advice I’d give Ian Holloway in what I hope will be a successful battle to stay up rather than how we choose between cutting social care, libraries, youth work and much more beside.

Lewisham Council’s Budget

Like Councils up and down the land we have been setting our budget for the coming year and in doing so faced some very difficult decisions as a result of the continuing cuts to our resources arising from the Government’s Austerity programme. This is what I said when I proposed the budget:-

Let me begin by thanking all those Council officers who have laboured for many months to provide the information and advice we need to be able to make decisions tonight, some of them will be leaving us shortly as they have taken up the option of voluntary severance but that has not diminished their commitment to helping us do the best we can in very difficult circumstances.

I also want to thank elected members for their input over the months – what is before you tonight is my budget proposal but I am certain that it is better because of the examination and challenge that has taken place along the way from all members of this council whether in Mayor and Cabinet or in Overview and Scrutiny.

Finally I want to thank those citizens who took part in the Big Budget Challenge and took the time to not only understand the issues we face but give us their views of how we might address them.

The proposals I am making tonight cover a huge range of activity and amount to something close to £1b of expenditure but in the arcane world of Local Government Finance the debates we have had over the past months have been about the shrinking amount of resources available for a range of services that many of us consider essential but which are classified as discretionary.

Let me deal quickly with three areas which together account for the greater part of the Council’s spending in any given year. There is the programme of long term investment which we roll forward year by year and which is essential to sustaining the infrastructure of the borough as we deal with our continuing population growth. One significant addition to the programme this year has been an allocation of around £25m for the acquisition of properties in the borough that can be used to provide accommodation for the growing number of families who are becoming homeless. This ensures better quality provision and makes financial sense as it eases the pressure on the revenue budget to meet such need.

The schools budget will be almost £276m for the coming year and this is ring fenced and allocated out again to schools.

The Housing Revenue Account is largely self sustaining and we are using it as creatively as possible to deliver more and more additional units of new housing in the borough which are at genuinely affordable rents. Our first new Council homes for some years are nearing completion and I recently agreed proposals for another 200 with many more to come. Nevertheless were the Government to agree to allow this Council to borrow up to the capacity it can afford rather than imposing an artificial cap we would be building even more new homes.

The General Fund Revenue Budget is the area which the current government has slashed over recent years forcing Councils like Lewisham to make large cuts year after year. Last year this budget was £268.1m – the most we can spend this year is £246.2m – a gap of nearly £22m – however the real shortfall is greater because the Council has faced extraordinary pressures in a number of areas where it needs to increase not decrease its expenditure with the result that we faced a shortfall of £39m. It is important to note that we spend something like £130m a year from this budget on Social Care for both adults and children in Lewisham. I do not believe we can reduce spending in that area pro rata to the overall reduction in funds from central government – not least because of the knock on impact to the NHS. However such is the scale of that spending if we do not make some savings in it whole areas of activity that many feel are essential could be wiped out.

After much discussion, consultation and not a few sleepless nights I am proposing a cuts package amounting to £28.2m for the coming year. I am proposing that the remaining gap be closed by using £5m from the government’s New Homes Bonus which is available to us because of the high number of new homes built in Lewisham in recent years and by drawing on reserves to cover the remaining gap. This latter is only a short term fix as we will need to find the savings in future years but having looked at the savings we would have had to make this year and taking into account the underlying strength of the Council’s reserves position I think that giving ourselves the extra time to find other ways to reduce expenditure is justified

Just as it has cut the funding available to Councils year on year so the current government has also reduced the ability of Councils to increase income by limiting how much Council Tax can rise by. For the coming year Lewisham was offered a grant of £978,000 if we froze Council Tax – the alternative was to increase it by the maximum permitted of 1.9% which would have brought in an additional £1,601,000 – a difference of just £623,000.

We are all conscious that the income of many of our fellow residents has been shrinking during this period of austerity and they face budget pressures of their own. Whether to seek an above inflation rise in Council Tax or accept the Government’s offer and freeze it for the coming year is a finely balanced choice but I think that for the coming year we should freeze it.

The background to these proposal is a failure by the current Government to understand the effect of its own decisions. The House of Commons Public Accounts Committee recently expressed concern that the Department for Communities and Local Government was failing to take responsibility for the very real threats to the viability of some services.

And we should be in no doubt that this is a real threat – on current projections Lewisham will have barely £10m over which it can exercise discretion by 2018. The Government that is elected in May whatever its make up must change course or services like Libraries, Youth Work, Crime Prevention and much more beside will face unbearable pressures.

It gives me no pleasure to propose this budget to Council but I know that the alternative would be to leave it to Central Government and allow these decisions to be made by those with no feel for, or commitment to, the people of Lewisham.

When we were elected last May we knew that we would face huge challenges and we were honest with our residents about that – they would not expect us to walk away now but to make the best decisions we can in the circumstances.

But they will also expect us to make clear the risks that lie ahead and demand that Lewisham in the future receives the fair treatment it has been denied for the last 5 years. I ask Council to agree the proposals I have set out and join with me in the coming months to demand a fair deal for our borough and its residents.