This paper from the New Local Government Network argues that dramatic cuts in public services could be avoided by giving councils new power to balance their budget over three years rather than one.

The paper presents a case for councils being allowed to introduce “Keynesian” economic policies in order to protect their communities from the recession. This would allow them to continue to invest in services and even offer targeted cuts in council tax. Currently councils have to balance their budgets every year. Giving councils three years to balance their books would allow them to invest in services at a time when their income is being reduced.

Councils now have their funding allocated over a three year period but have to match their income to their expenditure every year. Giving them the same ability as national government to balance their spending plans over a longer period would allow them to take a longer view.

A three year budget horizon would enable councils to give residents council tax discounts in a particularly difficult economic year and to retain staff, facilities and programmes which would otherwise face termination because of the in-year balance requirement.

It would also allow them to take advantage of circumstances when their income growth exceeds expectations and facilitate a ‘dividend’ to service users or taxpayers in future years. They would also be able to challenge the Police, JobCentrePlus, Primary Care Trusts and others to commit jointly to new programmes beyond core service provision and over the medium term.

IN THE BALANCE is available from NLGN. http://www.nlgn.org.uk/public/press-releases/in-the-balance-granting-local-authorities-new-financial-flexibilities-to-cope-with-the-downturn/