Following further detailed research of 5 years Council’s financial statements, and the response provided by the Returning Officer to my formal complaint on the Labour Party election leaflets, this is an updated article on the claims made. I had the opportunity to spend time with Martyn Marples, the Council’s Chief Financial Officer, in March 2015 to discuss much of the detail about the budgetting process, which helped to inform my understanding and reading of this documentation.
This statement appears in the vast majority of the Labour Party leaflets, newsletters, and on their website… and is unequivocal in its message.
The implication is that:
- £116m of actual expenditure has been cut from front-line services relative to 2010
- £45m has been formally instructed by the Government for the next 3 years ( the 3 years is referenced on the Labour Party website)
- Cuts were never required before the 2010 Tory Govt.
None of these statements is correct.
To recap, the Council funding, including Council Tax ( which has remained constant at £80m) , increased by £7m over the 5 years period.
NB: In the last 5 years, the structure of Council funding has changed significantly. In 2010, the Council funding consisted of 1 grant from the Government, plus Council Tax, directly from residents. Now the Council receives, Business rates (directly from local organisations), a Business rate Top-up grant (Govt), other specific grants (Govt) as well as the Council Tax, and the Revenue Support Grant (RSG) from the Govt – it is the RSG element (approx 20% of the total) which is diminishing – but as it is a small proportion of the total funding the effect is limited (~ 5%)
In 2010/11 budget was declared as £214.8m
In 2018/19 the budget is planned to be £214.5m ( £7.3m less than 2015/16), the same as 2010/11.
The £116m claim
Each year, the Council does a financial plan for the next year, + 2 following years. The start point for creating the plan is the forecast actual outturn for the previous year. To this is added Inflation, and an updated view of Budget Pressures ( typically growth in services, extra costs); this is compared to the funding for the year, and the balancing figure is “Savings” ( these are not necessarily Cuts to front-line services – it may be buying cheaper gas, or electricity, or a multitude of smarter ways of running the Council – there are many choices – it may be that the planned increases didn’t actually occur, so no savings required, or vice versa – it is only a plan – it is not a statement of fact).
In the budget prior to the Tories coming into power, it required savings of around £39m for 3 years ( see 2010/11 budget extract above). This represents a base “background” level of savings, totally unconnected with Government funding cuts. On this basis it would suggest £50m “savings” would have been apparently required over the last 5 year period. My interpretation of this is that, it is due to an over-pessimistic view of likely cost inflation, and, to the extent that it materialised, was managed within normal business – zero consequence on front-line services.
Mathematically, the £116m figure, was calculated by adding together the budget “Savings” ( NOT actual savings delivered) shown in each years plan from 2011/12 to 2015/16.
The problem with this approach is:
- It results in significant double-counting of Budget Pressures, particularly when something was planned in one year, but slipped into a future year. For example, in 2014/15 £3.4m was shown as as a pressure due to the salary increases from the implementation of the Equal Pay programme. This did not happen that year, and is repeated in the pressures for 2016/17. Adding these together would be a double-count.
- When a pressure is a one-off for that year, it should be excluded for a 5 year summation. For example, in 2011/12 there was £8m for redundancy payments in that year alone. Whilst a pressure in that year, it is not relevant for subsequent years.
The sum-total of pressures across the 5 years which are either double-counts, or one-offs is £40.3m
Derby City Council is unique in that it automatically adds in inflation into the plan, and does not assume that it can be controlled by better purchasing, smarter working etc. The vast majority of money spent by the Council is external – payroll costs are about 15% of the total. Other local authorities exclude inflation and use the budgetting process to drive budget holders to control it. In this 5 year period the Council planned £18m for inflation. This is over-stating the required “Savings”, and contributing to the apparent £116m “Cuts to front-line services”.
In the 5 year period since the Tories came to power , the Council underspent it’s budget each year – totalling £15.5m for the 5 year period. That implies that the budget was not challenging and the level of planned savings were not required.
The biggest flaw with the £116m number is that is calculated from a plan/forecast. It does not reflect what actually happened. The Labour Party implies that £116m was, in fact, actually slashed from services. That is simply NOT what this number represents. The Returning Officer studiously side-stepped commenting on my questions regarding whether this was an “auditted actual”. She described it as “the Labour Party’s political view of the actions/ inactions of government on the councils budget” and that “the political interpretation of figures and reasons behind them are the very basis of the political debate”.
It is not an number that has been derived from actual cost reductions in services taken from the accounting records; it is simply the addition of 5 numbers with no due consideration as to whether it was a logically valid calculation – which it isn’t.
The £45m Claim
The Government does not announce government spending beyond the next year. The future numbers are calculated by Council officers based on their predictions which may, or may not be correct.
The Returning Officer stated that the £45m has not been ” directly demanded by government”, and “there is not a £45 m cut however there is a direct cut of £12m”. This is a cut to one element of Government funding, the net reduction in 2016/17 is £9m.
- It is a fact that Total funding has not been cut from 2010/11 to 2015/16 – there has been an increase of £7m
- It is fair to say that additional burdens on the Council in the 5 years have not resulted in additional Government funding – the actual impact is unquantified.
- A Council which spends a total of £600m (gross) can save many millions without affecting front-line services.
- £116m has not been “slashed from services” – the number is grossly overstated, and the impact is total speculation. Are the Labour Party really expecting that the Government should have increased funding by 50% in 5 years? It’s not a sensible proposition.
- The Government has not demanded a £45m cut over the next 3 years. It is £9m for the next year, the rest is speculation, and planning.
As the Returning Officer quite succinctly confirmed, the Labour Party literature is a “political interpretation of the figures”.
Whilst we look through the “fog of numbers” and pointless politicking to achieve party political points, and engage in futile debate, the real issues are not being addressed which ensures the best outcomes for the people of Derby. Anyone with common sense can see that there was no good reason for withdrawing the Voluntary Sector Grants or the support for the Citizen’s Advice Bureau – as I stated in a previous article “no facts were used in making that decision” – it was purely done for political effect.
All figures are taken from Council documents on their website
The Returning Officer did not question the validity of the figures that I quoted.
Categories: Derby City Council