Council budgets: Watchdog warns of front-line cuts

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Library services are among those which have been cut, the watchdog said

Cuts to council budgets are having a direct impact on front-line services, the spending watchdog has warned.

The National Audit Office (NAO) said there had been cuts to libraries and social care, and some councils faced a "challenge" to meet their obligations while avoiding financial difficulties.

But it said the picture varied across England, with some councils seeing a minimal drop in their spending power.

Ministers said councils should seek to make savings in a "sensible" way.

Under the government's deficit reduction plan, central funding to local authorities is being cut by £7.6bn - or 26% - in real terms between 2011 and 2015, with overall council income expected to fall by 14%.

'Financial uncertainty'

Analysis by the NAO suggests councils in England have so far delivered only half the savings they need to achieve by the government's target date of March 2015.

While most authorities had "coped well" to date in managing funding cuts and focused largely on trying to find efficiency savings, the NAO found some had had to make cuts in areas such as adult social care and libraries.

In addition, more than 90 had had to draw on financial reserves to make up the shortfall in Whitehall funding.

The watchdog said the scope for reducing lower cost services was now diminishing and, at the same time, councils had to deal with rising demand for high-cost services, such as children's social care.

"There is emerging evidence that some service levels are reducing," the watchdog said. "Funding reductions are continuing, along with changes to the resourcing mechanism of local authorities."

"These changes increase financial uncertainty and more local authorities are facing the challenge to avoid financial difficulties while meeting their statutory responsibilities."

'Deep cuts'

Some councils had been more affected than others, it added. While some local authorities faced a near 9% drop in their overall spending power, others were having to adjust to a much smaller 1.1% reduction.

However, the NAO said information compiled by the Audit Commission, the local government spending watchdog, suggested that 12% of local authorities were at risk of not balancing future budgets.

Responding to the report, Labour MP Margaret Hodge - chairwoman of the Commons Public Accounts Committee, said the squeeze on council funding was likely to be exacerbated by lower council tax income and higher inflation than previously anticipated.

"Local authorities face deep cuts between now and 2015," she said.

"Many have rationed services, such as adult social care and libraries," she said. "I am alarmed to hear that 12% are now at risk of being unable to balance their books in the future, according to local auditors, with potentially disastrous consequences."

She said her committee, which scrutinises value for money in government spending, would be asking ministers to provide a "clear statement" on the impact of spending cuts for councils' income and provision of services.

"As the cuts kick in, the department needs to make clear what it will do if multiple authorities fail financially," she said.

'Reward councils'

The government said local authorities accounted for a quarter of public spending and therefore it was only right that the sector contributed to efforts to rebalance the public finances.

"Councils need to do their bit to deliver sensible savings, and in turn, protect front-line services and keep council tax down," a spokesman for the Department of Communities and Local Government said.

"Our broader local finance reforms will reward councils which promote local jobs and enterprise, driving economic growth and making councils less dependent on Whitehall handouts."

Local Government Secretary Eric Pickles and his opposition number Hilary Benn will address the financial health of councils when they speak at the New Local Government Network's annual conference later.