Labour’s Zero-Based Review: More than £500 million in efficiency savings identified in local government budget

Labour today sets out how it will make more than £500 million annual savings in the Communities and Local Government budget for the better protection of frontline services while getting the deficit down and implementing a radical devolution plan to pass power back to local communities.

The move follows Ed Miliband’s speech today on how Labour will balance the books in a fairer and more balanced way than the Tories.

In the third interim report from Labour’s Zero-Based Review (ZBR) of every pound spent by government, Chris Leslie, Shadow Chief Secretary to the Treasury, and Hilary Benn, Shadow Communities and Local Government Secretary, outline how Labour will:

  • save over £500 million a year from 2016/17 through shared services, back-office collaboration, and streamlining, to better protect the frontline;
  • end the complex, regressive and ineffective New Homes Bonus, with the funding reallocated more fairly within local government;
  • consider proposals to merge some of the 46 Fire and Rescue Authorities in England, making savings of between £62.7 million and £83.6 million a year, in order to better protect frontline firefighters and appliances; and
  • save £100 million from the £320 million Transformation Challenge Award 2014-16, in which small authorities have been forced to bid for central government approval for outsourcing projects rather than focussing on collaborating with neighbouring councils.  

The report identifies a series of wasteful measures under this government, including the delivery of just one fifth of the jobs anticipated from the £700 million Enterprise Zones scheme.

Savings found in these areas will help ensure the frontline in local government is better protected.

The report also sets out Labour’s plans to devolve £30 billion worth of funding over five years to city and county regions, covering jobs, skills, training, housing and local transport, and to integrate health and social care, so that local communities can better care for people with long-term conditions and disabilities. 

It follows a major speech from Ed Miliband today in which he outlined how the next Labour government will deal with the deficit and balance the books without going down the Tory road to take Britain back to 1930s spending levels.

Today Chris Leslie and Hilary Benn show how Labour will use the CLG budget to offer a new deal to communities in place of Eric Pickles’ unfair budget cuts and disempowering ‘localism’. 

Chris Leslie MP, Labour’s Shadow Chief Secretary to the Treasury, said:

“David Cameron’s government is set to break its promise to balance the books and get the national debt falling.

“The next Labour government will get the deficit and debt down, but we will do so in a fairer way and by examining every pound of spending. 

“Labour’s Zero-Based Review has identified more than £500 million a year of savings in the Communities and Local Government budget which will help to better protect frontline services as we get the deficit down.”

Hilary Benn MP, Labour’s Shadow Secretary of State for Communities and Local Government, said:

“Services locally should be built around people and places rather than institutional and administrative boundaries, which lead to inefficiencies and higher costs.

“By passing powers and resources down from Whitehall to local communities we can make savings and ensure that the money we have is better spent.”

The reports sets out that:

  • Through further sharing of services, collaboration and – where local areas want it – organisational change over £500m a year could be released from 2016/17 onwards, which would reduce the pressure to find cuts from the frontline. 
  • Labour’s approach in Government will ensure that councils are supported and empowered to make this step up in the extent of collaboration. 
  • We will build this expectation into our local funding reforms using the experience of those authorities who have done the most in terms of collaboration and bottom-up reorganisation as the benchmark. 
  • Multi-year budgets will enable councils to better overcome any up-front costs associated with this kind of reform in order to maximise savings to protect the frontline. 
  • And we will not stand in the way, as this Government has done, of councils which want to make more fundamental organisational change. 
  • Longer term multi-year budget settlements, greater freedom over budgets and ring-fences, and powers over wider areas of public services will involve clear plans to drive efficiencies through shared services, collaboration and organisational change in partnership with central government. 

The report builds on the work of Labour’s Local Government Innovation Taskforce, and the work of Andrew Adonis’ growth review. Too often in the past reforms such as those set out in the Adonis review and the Local Government Innovation Taskforce have been stymied by Whitehall and Treasury inertia.
 
This has to change. A Labour Treasury will be at the forefront of working with the DCLG, other departments and local government to change this culture and give the power and freedom to local areas to make those savings.
 
As part of that partnership we will expect local government to demonstrate that the best practice of those areas who have driven these savings through shared services and collaboration are taken forward across all local authorities.

The report highlights other areas where changes could better protect the frontline:

  • £100 million saved from the “Transformation Challenge Award”: £100 million can be saved from the aspects of the current department’s £320 million ‘Transformation Challenge Award’ for 2014-16 which relate to private sector re-design of service provision in small district authorities. We do not believe that small authorities should be bidding for central approval to encourage outsourcing arrangements when successful collaborations between neighbouring local authorities should be the primary focus.
  • Reallocating the New Homes Bonus: Labour will also end the complex, regressive and ineffective ‘New Homes Bonus’ with the funding reallocated more fairly within local government. The National Audit Office has found no persuasive evidence that the New Homes Bonus is having the effect of incentivising new house building and the Public Accounts Committee has questioned its effectiveness and fairness of its distribution, calling for an urgent review.
  • Fire Authorities: Labour is exploring more radical options for the Fire and Rescue Service and we are consulting on the scope to reduce the number of Fire and Rescue Authorities in order to protect the frontline. If savings were achieved of between 7.5 per cent and 10 per cent, as in Wales and Scotland, this could mean a potential saving of between £62.7 million and £83.6 million a year in England. 

As Ed Balls highlighted in his Reuters speech of June 2013, this Government has made no change to the number of departments, agencies, fire services and police forces, all with separate leadership and management structures. The case for collaboration is now surely overwhelming.