Viewpoint: A perfect storm of cuts and demand

The credit crunch is driving up demand for school meals but the money to pay for them is under threat

Fears of a protracted global recession, over-regulation, lack of access to capital markets and a rising tide of protectionism dominate business concerns across the world.

In contrast, governments at all levels have seen the demand for their services rise inexorably which has led to a significant increase in public sector spending

But all this is about to change. There is no doubt that local government and the public sector in general face swingeing budget cuts.

The leaders of these organisations face significant challenges in putting in place the foundations for a very different future from the first decade of the 21st Century.

PricewaterhouseCoopers (PwC) estimate that councils will need to find an additional 20 to 30% of current budgets to maintain services in coming years.

The rising cost of caring for an ageing population and taxes for using landfill have been a constant feature of budgets for some time. The credit crunch is now driving up demand for school places, free school meals and housing whilst income from rent, rates and other chargeable services, from leisure facilities to advertising, are reducing.

Local leaders are now beginning to recognise the scale of this "perfect storm" and to debate the changes that will be required.

They also recognise that the traditional approach to efficiency will not suffice. PwC believe that meeting this challenge will require dramatic changes to how authorities run themselves and how they work with others.

Options include:

• Shifing the balance of cost towards front line services by fully bringing together and standardising administration and management functions. This will mean a loss of jobs overall, but not in the numbers involved in service delivery.

• Using simpler ways of taking requests for service and information from citizens and to get that contact right first time. This will mean driving towards web and phone and offering self-service options. This is not new in concept but requires a renewed recognition that citizens will need to adopt a wholesale change.

• Consistently challenge levels of service that do not deliver direct and measurable value to citizens and harness the potential of communities to deliver.

This will mean controversial decisions over familiar local facilities and these changes must be presented as a package that preserves more important services - avoiding single issue campaigns distracting political will.

Charge the right price for services and to recover more of that revenue by taking payments simply and quickly.

Charges to citizens and businesses may go up in some areas for valued services, services may be withdrawn where a cheaper alternative exists but it will be easier to deal with the council.

Work across the public sector to use the total investment in an area to best effect. Of all these interventions this is the least tested. Local authority, emergency services, health and education are facing similar cost challenges in serving the same citizens.

PwC believes that delivering this new model with pace and ambition will not only meet the challenge but result in stronger local councils.

However, local leaders will recognise that these ideas are not new. The innovation will come in engaging elected members, citizens and staff to drive the change and take the difficult decisions that will secure the future of local service.

This scale of change will take time and must start now.

Managed well, the "perfect storm" could unlock the political will to make the most positive changes to local government in many years.