Margaret Eaton: Cutting pay of council chiefs will only make the slightest dent to the deficit

This year, more than others, there has been heightened interest in the local government budget setting process after councils were handed the toughest financial settlement in living memory.

There are different views as to how Britain built up such a large deficit, making a reduction in public spending so necessary. Some people blame the bankers, others claim big government had a significant part to play.

Whatever your view, one thing for certain is that local councils cannot be held accountable.

Councils are not free to spend money as they please, but are constrained by the financial package they are handed by central government.

While there is no doubt that overall council spending has risen in recent years, so has the number of services they provide as well as the complexity of those services and the populations they serve.

Already the most efficient part of the public sector – a point recognised by the Audit Commission, the Treasury and the Prime Minister – councils have been leading the way in trimming the fat over the past few years by sharing services, reducing costs and making the money they do get from Government go much further.

There are now more than 200 examples of councils sharing services and it is a trend that is set to continue.

By taking such steps, councils have made savings equivalent to £4.8m every day last year and more than £5.5bn in efficiency savings since 2007.

When the scale of the cuts became apparent, councils did all they could to prepare, shaving more than £1bn from their budgets in the middle of this year.

However, it takes time to put these kinds of arrangements in place and we cannot escape the reality that back-office efficiencies will not be enough to cope with the cuts that councils are now being asked to make.

If councils saved up to 40 per cent on back office functions, it would account for just 3.6 per cent of the total amount they need to save.

Although the settlement means an overall reduction of 28 per cent over four years, the decision to front load the cuts means, on average, there will be an 11 per cent reduction in 2011/12.

Some councils have seen a fall in the grant they receive from Government of up to 17 per cent in the first year.

Our original estimate was that the gap to be bridged in the first year was £4.5bn, but it is more likely this will be closer to £6.5bn. Faced with cuts of this scale, many councils will have no choice but to cut frontline services.

There is no doubt that, with the need to reduce the deficit, public services will have to change and councils are at the forefront of making that happen.

The oft repeated clarion call of cutting chief executive pay to protect frontline services will only make the slightest of dents in the deficit.

Of course, it is right that senior pay in the public sector should be reasonable, and is seen by the public to be reasonable.

But even if every council chief executive took a 50 per cent pay cut, it would equate to no more than 0.35 per cent of the savings needed to fill the funding gap for next year alone.

Even if every authority reduced the entire senior management team pay bill by 25 per cent, the savings would be just £157m.

What we need is a grown-up debate with the Government about how the cutbacks can be managed in a way that protects frontline services as far as possible.

The LGA has put a comprehensive range of common sense proposals on the table to help councils manage the realities they face, including the flexibility to spread the costs of redundancies over more than one year and a fair deal on the distribution of business rates from the Treasury.

Councils understand that ministers want to make the delivery of public services at every level more accountable through increased transparency.

We support these aims but believe the same principle should apply across the whole of the public sector.

If the public are to be truly well informed, they should be fully informed. Only then will they be able to form views based upon all facts rather than a partial picture.

We await with interest the White Paper on the future of public services. Outsourcing of services is something that councils have been doing for a long time now and they are well versed in working with various organisations.

Different areas have different pressures, and decisions on what to tender need to be taken locally. Any move to outsource a frontline service must always be for the benefit of residents.

Central prescription and top-down quotas would make no sense when locally-elected politicians have a greater understanding of the needs of local residents and the way they use services.