So where has the money gone then?

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In his latest Telegraph blog, Dan Hannan points out the big deception at the heart of the government’s fiscal strategy – the fact that, in the aggregate, there are no cuts:

The Treasury statistics are unambiguous. Total public spending has risen in every month since the coalition was formed. During the seven months that followed the general election, spending was £23.3 billion higher than during the equivalent period twelve months previously, an increase of seven per cent.

Except that – as we are all very painfully aware – there are cuts. Libraries, leisure centres and day care centres are shutting down. Your local hospital probably is being asked to make £20m in “savings”. And thousands of people really are losing their jobs.

So, as the man says, where is all that money going?

• Debt repayments – the more we borrow, the more we have to pay back and the less we have available to spend on the services people actually want us to provide. Currently, the government’s interest payments amount to around £31bn but the budget forecasts anticipate this rising to £60bn in 2015.
• Regulatory infrastructure – the ‘bonfire of quangos’ did not touch the core of our government’s regulatory infrastructure and it seems likely the government (local and national) will remove direct service before reducing regulatory bureaucracy. In some sectors, such as health and child protection we are likely to see increases in regulatory costs.
• Additional spending directed to schools and the NHS – although it doesn’t sound like it, the money heading to schools and frontline health care is planned to increase. This is partly at the expense of central supports and grants but includes real increases

Still this doesn’t seem to explain the pain – to show why the end of substantial year-on-year spending growth results in actual service cuts rather than an end to expansion? Which brings me to the final problem – inflation.

Public bodies have to budget for inflation. Across many services this can be managed – even removed from the budget – but some costs such as energy cannot be treated in such a way. And, as energy costs shoot upwards, there will be a significant impact on spending. Furthermore, public bodies have a range of contracts – PFI contracts, for example – that build in inflation making it harder for those bodies to constrain increases (and, incidentally, contributing to the continuance of higher than trend rates of inflation).

Which rather explains how we can have real increases in total spending while at the same time seeing serious reductions in front line services. Link this to the Labour Party’s penchant for using cuts as a political tool – the budget of spite in Manchester being an example – and we have something of a ‘cuts nightmare’.

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The budget Manchester City council might have set.

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Much furore has surrounded the publications – amidst great fanfare – of Manchester City Council’s budget proposals for 2011/12. These proposals have been flagged up as terrible, draconian and are accompanied by appropriate hand-washing and wring from Sir Richard Leese, the Council leader:

People should blame the coalition for “ideological” cuts, he said. 

 “A responsible government would never have done this. We would not have been cutting as fast or as deep as we have been forced to do.

What follows is – so far as I can from the selective and selected information published in this Council’s Executive Papers – an attempt to show how Manchester City Council might set a budget with minimum impact on ‘front-line’ services.

But first let’s set the real measure of the reductions relative to Manchester City Council’s spending. We do not yet have the final accounts for 2010/11 (not surprising given that the year hasn’t ended) so – given that the published 2011/12 budget documents do not include this information – we will use 2009/10 final accounts as an indication of the City Council’s total spending. These Accounts show that total expenditure in that year was just a shade short of £1.8bn. It is safe for us to assume that the outturn for 2010/11 will be of the same magnitude (source: Annual Statement of Accounts 2009/10).

According to the published budget documents, there is a shortfall of £109m for 2011/12 – representing a reduction of approximately 6% in total spending. It is this reduction that has been the source of the furore. However, we need also to take note of some other information relevant to our discussions of this budget:

1. The Council had already planned savings amount to £40m for 2011/12 as part of a medium term financial strategy agreed in February 2010 – before the budgets of 2010 and, of course, before the General Election
2. Just over £30m of the grant reduction faced by Manchester comes from the ending of Working Neighbourhoods Fund (WNF) – this was a time-limited funded established as a successor to Neighbourhood Renewal Fund (NRF) and targeted to areas with the highest levels of worklessness. The fund was planned to end in March 2011.

So £70m of the £109m savings are already accounted for in the Council’s medium term strategies. True the end of WNF will result in the closing of some valuable programmes and activities and the tight financial situation makes mainstreaming difficult. Nevertheless, this reduction has to have been planned – assuming a modicum of financial good sense in Manchester.

Within the budget documents, the Council identify a further reduction of £11m in the cost of the ‘corporate centre’ which can be taken with additional savings (12-15m) in procurement and containing price rises to reduce the shortfall to around £13m. Still a significant sum perhaps resulting in some front line pain but not the screaming cuts decried by their proposer, Sir Richard Leese!

And now for the final revelation- Manchester City Council has nearly £270m in ‘useable reserves’ (Annual Accounts 2009/10) – money set aside for various prudent purposes. These reserves are provision for a rainy day, so-to-speak! And if now isn’t a rainy day, I don’t know what qualifies! Some of these reserves could be directed to smoothing the impact of service reductions, on developing community delivery and bringing voluntary organisations into service delivery and on ‘spend-to-save’ initiatives.

It seems to me that Manchester City Council had no need to make the sort of cuts it has proposed today. I will add the caveat that I am not party to all the financial information – only that provided by the Council in its public forums. And I’m not saying that any service changes aren’t needed – merely that the proposals seem to be about maximising the pain rather than making a steady, planned and strategic shift in the Council’s operations.

Feel free to rip into my calculations, question my assumptions and challenge whether or not there are service cuts in what I propose. But while you’re doing that think of the people of Manchester who seem to be facing targeted and painful service cuts – either to provide substantial cash headroom for future years or else so Sir Richard Leese can make a big political point.

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CRB checks, bureacracy and regeneration

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I have to have another CRB check done. This is so I can sit in a committee room at Bradford City Hall and hear appeals against the Council’s refusal of support for travelling to school. Apparently, Councillors who sit on committees that “discharge any education or social services function” require a CRB check. Here in Bradford the Council’s bureaucracy has decided that this will be an ‘enhanced’ check.

I have no idea at all what all this is for, whether is achieves anything other than feed a system. I have no problem with running background checks on people who are working with children but I’m not doing that, I’m just sitting on a committee and won’t come into contact with any children who aren’t firmly attached (so to speak) to parents, guardians or other responsible adults. And that contact – if we can credit it with such a description – takes place in the company of other panel members, committee clerks, officers of the education authority and other assorted educational flotsam and jetsam. There is precisely zero risk associated with such a circumstance.

I am inclined not to complete the necessary forms and to see what happens – the worst outcome is that they take me off the Education Appeals Panel, which wouldn’t be a great loss on my part! However, the whole exercise does remind me of a lecture given by someone involved in regenerating (of trying to regenerate) Wythenshawe in South Manchester. Given Wythenshawe’s location close to the North West’s biggest employment generator – Manchester Airport – very few residents of the town actually secured work there. On investigation, it turned out that the main reason for this was that records of petty criminality or anti-social behaviour meant most of them failed security checks. As we were told – going straight doesn’t look a great option to these young men!

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