Cllr Neil Reddin is the Cabinet Member for Resources on Bromley Council and a chartered accountant. Here he looks at how to keep cutting costs after the "low hanging fruit" has been cropped.
Recent years have seen a good crop of Councils return to us after years of Labour or Lib Dem rule, and we have seen Conservatives in many of those councils working hard to bring their ships back on course and even, sometimes, cut council tax.
Yet what happens when the fat's been cut, the "low hanging fruit" has been cropped?
Is what Conservatives are achieving in councils inherited from financially incompetent left-wing administrations, or which received relatively favourable government funding levels, just down to good
fortune? Can we show that Conservatives continue to deliver into the second term and beyond?
The London Borough of Bromley has been Conservative for most of its 44-year history. But for a brief interregnum between 1998 and 2001 (a Lib/Lab administration), we haven't had the benefit of inheriting any left-wing grown fat on which to apply budgetary liposuction. Yet for many years, Bromley's council tax has been the lowest in outer London. In fact, relative to our government funding levels Bromley's Council Tax is lower than Wandsworth's.
We're an outer London borough on the "grant floor" which doesn't qualify for deprivation-factored funding. The "grant floor" is local government-speak for the safety net for councils who would, if the funding formula was applied "raw", lose out on central government grant, sometimes to the tune of £20 million - in Bromley's case. The "grant floor" means that any "extra" funding which is fed into the formula, doesn't actually reach councils. Quite often, also, the floor is increased by less than inflation.
So how do we manage it? Disappointingly, the answer is essentially "hard work". The first term after regaining control may resemble a sprint, after that it's a marathon.
The culture of budgetary discipline must be shared by all key players on both member and officer sides, and reinforcing that culture involves a number of measures:
1. Make time to act and start setting future years' budgets now. As politicians, the years after the next election can seem a mythical land, but if you plan to win that election, why wouldn't you plan for the years after just as you do those before it? In Bromley, as we set next year's budget we also extrapolate those figures across the following three years (at least) and savings for those future years are agreed now. Thus proposals such as "invest to save" schemes are built into future budgets, and managers are then committed to delivering those promised savings.
This approach also enables problems to be identified early so we have time to work up solutions. It also means we can reject unacceptable budget options and demand something else without being "bounced" into desperate measures to plug urgent financial holes.
Setting four year budgets means you avoid any panic redrafting of the budget minutes before the tax-setting council meeting. In Bromley, the budgeting for 2009/10 arguably started four year's ago. The process in earnest started the day after Council set the 2008/09 figures, and even then we already had a reasonable idea of the figures we would be debating a year later.
2. Growth is not an option (within reason). "Consume your own smoke" is a phrase we use in Bromley. A core budget is recognised, where natural and unavoidable shifts in costs (such as landfill tax, or numbers of adults with learning difficulties) are accounted for. However, if a department is underachieving a promised saving or income target, then it's expected to find corresponding savings from within, without hitting the council's bottom line or putting pressure on another department's budget.
3. That being said, the core budget is not sacrosanct. So often budget
savings can be little more than reductions in the rate of growth rather
than genuine savings on core costs. To address this many
methods abound. In Bromley, we use a combination of in-depth
improvement and efficiency reviews, zero based budgeting, lean
thinking, effective scrutiny and (the much maligned) salami-slicing.
4. Choose your battles. As much political advice as financial, remember
that there is a time and a place for a showdown. If you have created
time to act then you can take this longer term view. Margaret Thatcher
didn't take on Scargill in 1981 because she knew the country wasn't
ready. Instead, she used the subsequent years to prepare for the fight
that came in 1984 (notably by stocking up power stations to
neutralise Scargill's most powerful weapon: power cuts).
5. Look after the capital. In all the fuss about Council Tax, it's easy to overlook the capital budgets. Whether you're virtually debt-free like Bromley, or not (more likely if the Trots have been in charge), the balance sheet matters. Our capital projections extend ten years, enabling us to see the real effect of our decisions on our reserves. After all, every capital project has a revenue implication, even if it is just in interest lost or charged.
6. Get your information right. Dull but vital: if you don't have quality information, then how can you make quality decisions? Our Director of Resources can re-tell a story of one former authority he worked at, where five years' of accounts were still not finalised when he started there. It wasn't a low taxing authority, but nor was it short of government financial largesse.
It is these factors, among others, that ensure that we achieve with very little what most left-wing councils cannot manage with many times the levels of government funding – and our residents have endorsed that fact at the ballot box.
