The pandemic and long-term implications of Brexit have created the foundations for a financial reckoning so significant, many will struggle to comprehend its magnitude.
In local government alone, our forecast highlights a possible £4.8 billion funding gap by 2026/27. Over the coming year, inflation is anticipated to reach 10%, and growth in GDP is expected to shrink from around 4% in 2022 to 1.3% in 2023. The consequences of these factors are stark. But plainly speaking, those who are least resilient will be the hardest hit.
As government tries to develop a plan to weather this particular storm, it’s already signalled that public sector spending will be one of the first in the firing line – announcing the need to cut 91,000 civil service jobs and save £3.75billion. And, given past precedent, it’s not difficult to see how these economic and associated social challenges will find their way back to the front door of other public services.
At the beginning of the year, our Financial Foresight tool, developed in partnership with the Chartered Institute of Public Finance and Accountancy (CIPFA), projected the in-year gap between local authority income and expenditure to reach £3.5 billion by 2026/27. However, more recent projections, including a protracted period of high inflation, now increase that gap by £1.3billion to £4.8billion. And this is before we include the impact of growing demand for front-line services resulting from the cost-of-living crisis.
There has never been a more critical time for public sector leaders
At Grant Thornton we believe modern public services should be sustainable, people-centred, data-driven and digitally enabled.
Yet, a decade of budget pressures and swinging policy demands has meant that much-needed innovation has struggled to gain the traction needed for mass adoption. Similarly, the essential foundations for change - digital, enabling and people-centred functions - have been neglected or eroded over the same period.
Fundamentally, the public sector needs a new model for change.
As the sector comes together at the LGA conference in Harrogate, we’ll be exploring the three core levers (outlined below) that local authorities have at their disposal to help them weather the impending storm.
Grant Thornton’s Levers for Change
- Transformation – How do we adopt new approaches to service delivery and address the underlying assumptions that drive our view on how services should be provided?
- Modernisation - How do we make sure that data and technology genuinely help provide new solutions to old problems?
- Reprioritisation - How do we align services to the big challenges we face in our place?