One in eight councils risks missing savings target, finds NAO

http://www.guardian.co.uk/society/2013/jan/30/councils-savings-target-nao

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One in every eight councils is at risk of being unable to balance its books, a shortfall that could lead to further deep reductions in services, Whitehall's spending watchdog has warned.

The National Audit Office found that only half the savings required by all 353 local authorities in England by March 2015 have been delivered.

While most authorities have so far managed to absorb the cuts in central government funding, the NAO said that some councils faced a growing challenge to stay out of financial difficulties while meeting all their legal obligations.

Some councils have cut services such as adult social care and libraries, while 93 have had to draw on their financial reserves to make up the shortfall in funding from government, auditors found.

Under George Osborne's deficit reduction plan, funding from central government is being cut by £7.6bn (26%) in real terms between 2011 and 2015, with overall council income expected to fall by 14%.

Auditors said the impact on individual authorities would vary widely, with some facing a reduction in spending power of as low as 1.1% in cash terms, while 12 councils stood to lose the maximum of 8.8%.

The NAO said: "There is emerging evidence that some service levels are reducing. Funding reductions are continuing, along with changes to the resourcing mechanism of local authorities.

"These changes increase financial uncertainty and more local authorities are facing the challenge to avoid financial difficulties while meeting their statutory responsibilities.

"This risk will not manifest itself evenly across the sector, with some local authorities being more affected than others. This risk must be identified early so it can be managed effectively."

Margaret Hodge, chair of the public accounts committee, which monitors public spending, said that the government's initial plan to cut central funding had been loaded with additional cuts of £445m for 2014/2015, but that this had not led to a new calculation of local authority income by the Treasury.

Hodge said: "I find it extraordinary that the government has failed to publish a revised figure for the total reduction of local authority income. The government's lack of transparency leaves individual authorities and the public in the dark about the true extent of the cuts that still await their communities.

"This report estimates that the £4.6bn savings expected to be achieved by authorities by April 2013 are likely to represent just half of the total required.

A Department for Communities and Local Government spokesman said that the public sector needed to help tackle the deficit left by the last administration, including local government, which accounted for a quarter of all public spending. He said: "Our broader local finance reforms will reward councils which promote local jobs and enterprise, driving economic growth and making councils less dependent on Whitehall handouts."

David Simmonds, the Conservative deputy leader of Hillingdon council and spokesman for the Local Government Association, said that cuts had already hit services in his local authority because many contracts had had to be honoured despite a 30% cut in government funding announced in 2010.

"We had already signed contracts with careers advice providers and were legally obliged to honour them. As a result, we had to cut the number of people training teachers instead," Simmonds said. "Councils can manage the financial situation much better if proper notice is given – in this case it wasn't."