CFOs losing confidence over council finances in medium-term, says research

The confidence of Chief Finance Officers at local authorities in their ability to deliver services and maintain a sound financial position in the medium term is falling, research by the Chartered Institute of Public Finance and Accountancy (CIPFA) has revealed.

A survey of 134 CFOs conducted by CIPFA as councils prepare budgets for the 2012/13 financial year found that:

• A quarter (25%) were much less confident about their finances for 2013/14 and 41% were slightly less confident than they were 12 months ago. Just 16% said they were slightly more confident in the future financial position;
• More than half (51%) were slightly less confident and 19% were much less confident in their ability to deliver services than they were at the same time last year.

The CIPFA study also showed that the vast majority of councils are planning real terms reductions in overall spending in 2012/13.

More than a third (38%) are likely to reduce budgets by up to 4.9%, while 40% are set to cut their budgets by between 5 and 9.9%. Some 15% of councils expect a reduction of 10% or more.

The survey found that budgets for capital investment projects and economic regeneration, children’s services and housing were most likely to be protected from cuts. In contrast, services such as leisure and libraries as well as support services such as finance, IT and HR were expected to face deeper reductions.

The main measures being used to deliver a balanced budget in 2012/13 are: restructuring and reorganisation (93%); new efficiency measures (91%); rationalising property and other assets (85%); increasing fees and charges (75%) and sharing services with other public bodies (67%).

Other measures include discontinuing established services (38%), outsourcing to the third sector or social enterprises (33%), introducing fees and charges for previously free services (33%), and outsourcing services to the private sector (33%).

CIPFA chief executive Steve Freer said: “Our survey gets behind the headlines about council tax setting and begins to explore the difficult choices which councils are making about local service priorities.

“CFOs remain relatively confident about managing the challenges facing councils in the immediate future (2012/13). However they are much more anxious about the medium term position (2013/14). As well as focusing on delivery of 2012/13 budgets, it will therefore be essential to devote yet more time and energy to medium term financial and service planning to develop the strategies for managing through the very difficult challenges which still lie ahead.”