George Black, chief executive of Glasgow City Council, will have his Alistair Darling moment today when he tells staff that the local authority is in uncharted financial waters, facing the prospect of cutting budgets by more than £40m in the next financial year to protect reserves. The Chancellor was criticised last summer for suggesting that the worst economic situation in 60 years awaited the west. But he turned out to be correct. Yesterday Mr Darling warned that Britain was far from through a recession, suggesting that the government's forecast of a recovery in the second half of this year was overly optimistic.
George Black, chief executive of Glasgow City Council, will have his Alistair Darling moment today when he tells staff that the local authority is in uncharted financial waters, facing the prospect of cutting budgets by more than £40m in the next financial year to protect reserves. The Chancellor was criticised last summer for suggesting that the worst economic situation in 60 years awaited the west. But he turned out to be correct. Yesterday Mr Darling warned that Britain was far from through a recession, suggesting that the government's forecast of a recovery in the second half of this year was overly optimistic.
The pot Mr Black manages is much more modest than the Treasury coffers but he, too, is in the uncomfortable position of having to prepare the public and staff for a worsening outlook and its consequences. Both outlook and impact are bleak across the council landscape, the consequence of a hike in bills and costs and a slump in revenues. Glasgow is not alone in contemplating deeper savings to protect services as well as rainy-day cash. But the problems are perhaps most pressing in Scotland's biggest local authority, in part because it began freezing council tax two years before this was implemented across the country under the council concordat with the Scottish Government, and in part because of disproportionately high levels of poverty and deprivation in the city.
Economic strategies had been put in place to enable Glasgow fully to break from its clinging past and turn itself round. These policies promised much in buoyant economic times but in a recession they offer only limited hope (if any hope). Fees from planning are down by £1m a month in the downturn. Business failures result in a reduced non-domestic rates take.
At the same time, historically high gas and electricity prices have forced up bills. Some might question why councils need to build up and protect reserves but it makes for good housekeeping (if only banks and building societies had been prudent that way). The consequences of revenue streams drying up and undermining reserves in the process are potentially serious in Glasgow, given the investment required for the 2014 Commonwealth Games, the M74 extension and other major programmes - and the lessons of history, which teaches that such projects tend to incur cost overruns that must be met by emergency funding. It is for such eventualities that reserves are kept.
The financial crisis facing councils suggests that the time is ripe to look afresh at how local authorities are funded and managed. The much-maligned SNP local income tax is not the answer (paradoxically, the burdensome target of £500m in savings the Scottish Government expects councils to make in 2010-11 was set in part to free up cash to make up for the shortfalls in local authority funding resulting from LIT). These are extremely difficult times. But the economic crisis does not mask the fact that there must be a better, more cost-effective way to fund and run our local authorities.
