Monday, 21 March 2011

The Most Imprudent Budget in History

Sheffield City Council has just set its budget for 2011/12.

It is the most imprudent budget I have seen since the council was established in 1974. It is a triumph for denial over reality.

Over the last decade, the Council has received year-on-year increases in government grant – the biggest increases, in percentage and total, have been for school budgets. In addition, there was a very significant rise in capital expenditure – for example on Decent Homes and school buildings – enabling a major attack to be made on the state of disrepair left as part of the previous Conservative governments’ legacy.

When the current Liberal Democrat administration came to power in 2008, it inherited healthy finances, strong balances and a bonus £18m under-spend. It has made a lot of noise about not increasing council tax, but kept totally quiet about only achieving this by using the inherited balances to support current expenditure. It’s rather like using your savings to pay the food bills.

The new Conservative-led government has announced major cuts in government grant and spending power for all councils over the next 4 years, but heavily front-loaded. For Sheffield, this means a cut in spending power of 14.4% from 2010/11 to 2011/12, with more cuts in each successive year. There are also major cuts in capital expenditure – modernising homes, building and modernising schools etc - from about £300 million in 2010/11 to £227 million in 2011/12 and £100 million in 2012/13. This means big cuts in jobs in the local construction industry.

There is a £220 million hole in the council’s finances over the next 4 years. But, in order to pretend that the cuts are not as bad as required, the Liberal Democrats have decided to use all the available savings – including the £5 million put on one side for the Housing PFI to repair the city’s roads - next year.

This is like using all your savings to pay for the food, electricity and mortgage this month, when you know that you’ve got another big cut in wages coming next month, and yet you tell your family and friends that you’re future is financially fine.

If your friends knew the truth about your finances, they’d tell you that what you were planning is simply madness and that you’re in denial. No debt adviser would think this was sensible. Of course, ironically, the council is planning big cuts in debt advice services, like those currently offered locally by Mosborough CAB.

I predict that the council – whoever is in control after the local elections – will have to start making very big additional cuts in services and jobs by September at the latest. To believe otherwise is just fantasy.