12 December 2008
By Alex Klaushofer
Councils are better placed to counter the impact of the recession than expected, according to the Audit Commission.
Its survey of chief finance officers in England found that 45% considered that serious action was needed to address the downturn – but two-thirds were confident their authorities were taking the right measures.
'We were surprised by how confident they were that they could deal with the pressures,' said report author Diane Ridley, the commission's head of research.
Councils anticipated the need to deal with rising costs when setting their 2008/09 budget, the survey showed.
Cost-cutting steps already taken included efficiency savings, service cuts, digging into reserves and leaving staff vacancies unfilled.
Other pressures on local authorities come from the rising demand for services as the credit crunch affects service users.
Two-thirds of councils reported increases in applications for housing and other benefits, while one in ten said demand for state school places was increasing as parents pulled their children out of private education.
Councils in England would have to find an additional £2.5bn on top of their £125bn budget to foot their rising bills, according to the finance officers' estimates.
Ridley cautioned that while a high proportion of councils believed they were coping, around 20 authorities sensed trouble ahead.
'They're saying: “Yes, we need to take action” and “No, we're not confident we're going to be able to do it”.'
But she said that, with inflation now heading below the 3.5% rate that prevailed when councils' budgets were set, better times could be on the horizon.
'It's not all bad news for 2009/10,' she said. 'If inflation is 1%, that grant's going to go further. Whether that will counteract the increases in demand, we really don't know,' she added.
The Audit Commission will publish the full report of the study, Crunch time? The impact of the economic downturn on local government, on December 19.
The survey questioned 145 chief finance officers in England between October and November this year.
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