Best of times, worst of times

Whichever way you look at it, the financial prospects for local government are grim indeed. Councils will be relying heavily on their legal advisers to guide them successfully through what could be an extremely painful period of upheaval, Tony Travers told delegates at the ACSeS conference.

Demand for legal advice is likely to grow in coming years as local authorities grapple with inescapable costs pressures, leading local government academic Tony Travers has predicted.

Delivering the keynote speech at the annual conference of the Association of Council Secretaries and Solicitors in Leeds last week, he told delegates that the public sector faces “up to seven or even more years” of public spending growth of around 0% in real terms.

Travers, director of the Greater London Group at the London School of Economics, said this would be “an extraordinary switch-back” after a decade of real terms increases. “We face an equivalently long period of public spending being held level, and therefore falling as a share of GDP. This could mean cuts in local government of between 15-20% over five years.”

If, as seems likely, the NHS and schools remain relatively insulated from cutbacks, then the pressure on all other public sector services will be even more significant.

Within local government, priority will be given to children’s services, services for the elderly and community safety, Travers forecast. “This is going to create super-losers – the fire service, highways and central administration. Everything that is invisible to the public will inevitably be squeezed harder.”

Preserving core services

In all of this, the LSE academic said, local government would have to make hard choices. The focus will be on how to preserve broadly the core of the welfare state, particularly for the most vulnerable and those in most need of services, when its size will have to be reduced.

This will lead local authorities to consider increasing fees and charges, Travers predicted, as some of the more radical Conservative authorities have already done in a bid to take the pressure off council tax. “I think all authorities of all parties will come under pressure to put fees and charges up as it is a way of sustaining expenditure without the need to cut core services.”

The Barnet ‘EasyCouncil’ model is not unrelated to this, he said, as the council is trying to find ways of charging extra for higher levels of service in order to cross-subsidise the core service.

“This approach will have legal implications and some authorities might even press to be able to make charges where they now can’t,” Travers forecast. The Passport Office’s charge for a premium service for issuing new passports more quickly is a good example of how things might operate in the future. A linked idea is for co-payments by individuals for parts of the service they receive – as happens, for example, in NHS dentistry – is also likely to be discussed.

Outsourcing back in favour

Another seam of work for lawyers will be the outsourcing of routine activity. “A number of councils have already been experimenting with outsourcing audit, legal services and various kinds of behind the frontline provision,” reported Travers. “Essex and Barnet, but not only they, have been investigating the outsourcing of a significant proportion of their activities and they believe that this could save hundreds of millions of pounds. If one or two authorities were to do this and deliver savings on anything like that scale, there will be an enormous rush to do it.”

The increasing emphasis on partnerships delivering joint services will similarly increase demand for legal advice. “The current buzzwords are Total Place, which came out of the Treasury-sponsored Bichard review,” Travers said. “This is the idea that local public providers should get together to deliver services more jointly, preferably pooling some of the resources. Single local budgets would allow enormous savings if it could all be put together, but it is a very big if.”

There could meanwhile be a move among some councils to cut back on non-compulsory services or stop them altogether. “But [it can be] very difficult to work out which local authority services are compulsory and which are non-compulsory,” he pointed out. “The truth is it is very difficult to draw the line between these things, even if they are provided under a power rather than a duty.”

Many of these options round service provision are complex and will require a change to the way authorities think. Travers said there was therefore a risk that local authorities will simply “salami-slice” all services.

“In some ways, taking 5% off everything this year would be easier,” he suggests. “It saves thinking, nobody can complain, and it looks fair, although it’s not intellectually very cogent. Private companies with short, sharp problems often do this. It can also make it [cutting back] feel like a common endeavour.”

Selling the silver

A further development that will stoke demand for legal advice will be when local authorities come under pressure to sell land and properties, which is likely to happen when values start to rise. “The overall estate of local government is broadly thought to be worth £250bn – a lot of it in housing but not all of it,” said Travers.

“The pressure on the public finances will inevitably mean that the Chancellor of the Exchequer, of whichever party, will want to sell assets. It is what the Thatcher government did during the 1980s and is what the present government has begun to discuss doing.”

Employment advice will be a growth area too, with Travers predicting a “substantial” reduction in the public sector workforce over seven to ten years – to the size it was in 2000.

“It is inconceivable that this will all be achieved by voluntary redundancies,” he said. “The constraints on making people redundant are greater than they used to be and this means local authorities are going to face an issue that will be more painful than it would have been in, say, the early 1980s.”

An across the board pay bill freeze will be difficult to impose, he suggested, but is also likely to happen. “It would effectively create a choice between the same number of people reduced by natural attrition or higher pay but a faster fall in the number of people employed. I can immediately see legal implications of the need to reduce public sector numbers relatively quickly.”

Reasons to be cheerful

Travers said he did not want to be too gloomy, but was trying to be realistic. And he was trenchant in his criticism of politicians’ unwillingness to admit the extent of the problems the country faces. “There is an enormous sense of denial within the national political class at the moment, already enfeebled for reasons of its own making (the expenses crisis), but now unwilling to tell the electorate about the scale of public expenditure reductions that lie ahead”.

Nonetheless there are, in his view, two reasons for optimism. “One is that local government always emerges better from these periods of constraint. The other is that there will be changes that require people to think about the limits of what they can do, what is legal and what isn’t. As they say in the best management handbooks, change and challenge also brings opportunities.”