August 12, 2009 12:01 am

UK councils facing age of austerity

Local authorities are cutting jobs, reducing budgets for services and drawing on reserves as the public sector begins to feel the impact of the recession, the Audit Commission said on Tuesday.

And the general outlook for public sector employment is becoming more grim, according to a separate study by the Chartered Institute of Personnel and Development.

Employment intentions in the public sector had “plummeted”, the institute said, with many more public HR directors projecting job cuts than recruitment.

“The perception that public sector organisations are immune to the recession looks set to be dispelled in the coming months,” the CIPD said, with a third of public sector organisations now planning redundancies and one in eight projecting a cut of at least 10 per cent in their workforce.

Local government, further and higher education and central government administration looked likely to be hardest hit, the survey said.

Redundancies had already begun in almost half of district councils and a third of all others, the Audit Commission noted.

Half of district councils – which rely on income from planning applications, parking fees and interest on their capital holdings – are already using reserves, along with a third of other councils. The same proportions have instituted some cuts in service budgets, while 17 per cent of districts and 8 per cent of other councils have reduced budgets for grants to voluntary organisations.

In the face of rising demand for housing, school places, welfare, debt and mental health advice as the recession bites, councils face a choice between meeting demand while making efficiency savings or budget cuts elsewhere; reducing the eligibility for services such as home help and other social care support; or, where they do not statutorily have to provide a service, choosing not to meet demand, the Audit Commission said. “Most are currently using the first option but others may need to be considered as service demands increase.

The commission added that most councils had made “a positive initial response” to the recession, in helping business to stay afloat and people to retain their homes and jobs, while providing more debt and welfare advice.

Most had used low risk, well tried and tested approaches, Steve Bundred, the commission’s chief executive said, based on its survey of half of all local authorities.

Some have been more innovative. Essex has launched a bank with Santander, using its local knowledge to help businesses to get credit. Wigan is working with local GPs to offer employment and debt advice to those with stress-related conditions, rather than just a prescription for drugs. Northumberland has part-funded a management buy out of a local food firm, securing 190 jobs.

Later stages of the recession would however see councils facing bigger social consequences as unemployment rose, Mr Bundred said, and councils needed to prepare for that.

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