The cracks are beginning to show: What local government needs to do now to meet the financial challenges ahead

It is unusual to go a day without reading or hearing about the difficulties of coping during these austere times. No one is immune from financial pressures, least of all our public services. Like most of us, public services are having to manage with less. And the challenge is getting harder as budgets are cut at the same time as demand for some public services is increasing.

We have just issued a report outlining how councils in Wales have coped with the financial pressures they face – and how well prepared they are to tackle the increasing pressure over the next few years.

The good news is that the significant majority of our councils have been able to meet the financial challenges so far, despite considerable pressures. But the bad news is that cracks are starting to show.

Our research found that that many councils in Wales don’t have adequate plans for tackling the financial challenges they face. For example, some councils are not good at using financial information to help them develop their strategic plans, and not all of them are good at monitoring their progress against those plans. These councils will need to raise their game.

Our report includes recommendations designed to help councils in Wales improve their financial resilience. We believe they should:

  • Improve their planning processes and develop clear strategies and plans which explain what they want to achieve and how they intend to achieve it.
  • Ensure their plans and strategies are supported by longer-term financial plans.
  • Explore more opportunities to work together, and with other public services, to reduce costs and improve outcomes for citizens.
  • Better understand the impact that their financial decisions have on citizens
  • Develop robust arrangements to monitor the savings they achieve

Reassuringly, some council’s have risen to the challenge. Our report identifies a range of good practice and provides case studies where local authorities are responding effectively – and, in some cases, creatively – to the financial challenges facing them.

We have deliberately avoided reinventing the wheel by developing yet another guide or checklist. Instead, our report includes a comprehensive Appendix outlining the excellent resources which are already available to help council officers and elected members strengthen their financial planning and management arrangements. A good starting point is to check out the advice and guidance available from our own Good Practice Exchange.

Our focus on financial resilience does not stop with the publication of this report. This year we began a series of studies exploring how local government services in Wales are managing with less. Our current focus is on environmental health and we are consulting councils on the service focus of our 2014-15 review. We also intend to follow up our 2012 report on the way local authority reserves are being managed, exploring financial sustainability and the rationale used by councils to transfer resources between earmarked reserves (those held to fund specific projects) and general reserves (those held as security against unanticipated expenditure).

Paul Goodlad

About the Author

Paul Goodlad joined the Wales Audit Office in January 2013 as a local government performance auditor, having spent over 10 years with the Audit Commission in England, doing a similar role.

Paul began his career as a chartered surveyor in the mining industry – initially producing coal and subsequently developing business parks on former-colliery sites – before moving into audit, via posts managing a variety of regeneration and economic development initiatives.

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