Road to nowhere?

A report by the New Local Government Network (NLGN) has warned that local authorities could lose over a third of central government funding over the life of the current parliament. Chris Newbould looks at the implications for the oft-overlooked highway maintenance sector.

The new report warns that the £1.165 billion cuts to local authority grants already announced by Chancellor George Osborne will be small “compared with the tsunami of funding cuts that will hit councils.”

Cuts to grants this year include £533 million from the Department for Communities and Local government and £311 million from transport. Additional cuts to non-departmental government bodies and planned “efficiency savings” mean that local authorities could have to manage cuts exceeding £2 billion by March 2011.

Many councils have already begun to axe non-essential services and those which they are not legally bound to deliver, such as culture and sport, social services and highway maintenance.
Bolton Metropolitan Borough Council, for example, has shifted to a policy of reactive, rather than planned, maintenance, in the face of an estimated 90 per cent cut to the budget available for resurfacing roads and footpaths. Councillor Akhtar Zaman, executive member for environmental services, commented: "We will be aiming to minimise the impact on frontline service delivery wherever possible.
"But the effect of these savings means the service will need to be restructured and there will be a reduction in posts due to loss of funding.
"We are consulting with staff and trade unions on the proposals and, as is the case across the council, we will be looking to encourage staff to take early retirement or voluntary severance."
He added: "We will still be carrying out urgent repairs to ensure our roads are safe and usable, and we will target the funding remaining wisely to those roads that will benefit most from being improved."

Bolton residents can consider themselves lucky compared to some other areas of the country, however. While the cuts are swathing, the town’s £48M transport interchange remains unaffected as this forms part of the ringfenced Greater Manchester Transport fund – the ‘plan B’ created in the wake of the city-region’s failed congestion charge bid.
The UK’s trade body for road maintenance, Highways Term Maintenance Association (HTMA) has also warned that repairs and improvements to the nation’s roads could be seen as an easy target by a government desperate to slash public expenditure. Mike Notman, outgoing chairman of HTMA, said its members were at the forefront of helping to lessen the effects of the axe. “Highways maintenance is an easy target. Capital schemes such as safety improvements, congestion management and highway improvements can simply be slashed from the budget to make savings in the short-term. But this can be a false economy as the long-term costs are greater.”

Notman, who is coincidentally also PFI project director at Amey, was not entirely pessimistic, however, noting the potential for savings through private sector involvement with local authorities’ highway maintenance programmes. He added: “There is no doubt that the private sector delivers a more efficient and effective service than its public sector counterparts. This is due to a number of reasons – they are more commercially focused, have more effective processes and procedures, have greater buying power and are focused on outcomes and performance measures.
“Private sector companies undertake these services across the UK and therefore have much greater knowledge and experience of delivery. The private sector also does not have the same final salary pension burden of local authorities”

Notman claims that private sector companies can reduce costs by as much as 15 per cent without affecting the standard of service provided. He also says that further savings can be achieved by the ‘bundling’ of services, since many HTMA members can carry out for more than highway repair and maintenance. Enterprise and May Gurney, for example, both offer refuse collection services.

There is certainly a logic to bundling services like highway maintenance, street sweeping, grass verge cutting and litter picking into a single contract, and it seems likely that savings could be made. Of course, it could be argued that this was the situation that existed under the old Direct Labour Organisations, before the values of the free market were imposed on local authorities. Indeed, DLOs also delivered dramatic savings on the costly tendering process.

Notman himself claims that the reason many councils have not taken up the options of PFI, PPP or bundled service contracts are political, and that councils simply do not wish to relinquish control of such services. He may have a point, but on the other side of the coin it could be argued that the sheer swiftness and depth of the current cuts are equally politically motivated – the swinging axe of a party that is diametrically opposed to the notion of publicly-owned and delivered services, and keen to see them swiftly transferred into the hands of their private sector paymasters. The truth probably lies somewhere between the two.

Of course, it is not only highways that face challenging times ahead as the coalition seeks to balance the books. Tony Travers, director of the London Group at the London School of Economics, has claimed that the public should brace itself for a lower standard of public services, higher charges for those services, or a combination of the two. From the change of government in May to the end of July, councils had scrapped housing projects set to deliver around 7,500 new subsidised homes under the instruction of Communities and Local Government Minister, Eric Pickles. Since the election, housing commitments have been cut by £450 million, including cuts to buyer subsidies such as “Social-Homebuy” and “Rent-to-Homebuy”.

Further financial pressure will be exerted on local authorities by the government’s Academies Bill, which will see educational funding taken out of the hands of local authorities, while the much publicised Building Schools for the Future cancellation, as covered elsewhere this issue, is commonly see as, at best, a disaster for local authority education provision.

It’s not only services that the new government is looking to bundle. In order to put in place this scale of cuts, local authorities are being instructed by the government to share services or merge with neighbouring authorities and other public bodies. Some of the more histrionic commentators have even predicted a possible merger of all Welsh councils into a single authority by 2016.

It looks set to be a challenging time for all, and with issues such as transport and street lighting at the forefront of attempts to improve UK plc’s environmental as well as economic performance, this sector is no exception. Perhaps this where we learn how much truth lies in the Conservative’s firmly held belief that it is the private sector that has the initiative, the motivation and the business sense to solve the nation’s woes. The challenge has been laid down. It will be interesting to see how it is met.