This book aims to analyse the impact of the financial crisis on public services and local government. Public debt in Britain is high¹ and to tackle this, the Conservative–Liberal Democrat Coalition government elected in May 2010 confirmed immediate reductions in public expenditure in 2010/11. The general election, however, was fought on the basis of not ‘if ’ but ‘when’, and by whom, such reductions would be made and how the consequences of these reductions would be managed. It is the impact for providers and users of public services, and more widely for government and governance, which will be explored...

The global financial crisis, which began in 2007 and was temporarily contained in 2009 by national-level government interventions, still holds deep and worrying implications for the future. As nations have accrued huge deficits to prop up transnational financial institutions, the problems remain of large amounts of overvalued assets on banks’ balance sheets, and unknown liabilities in off-balance-sheet vehicles. However, most significant and immediate for the theme addressed in this book is the British government’s decision to maintain and increase spending in response to the crisis. This has led to an unprecedented peace-time budget deficit that now necessitates both cuts in...

The sub-prime crisis of 2007 and the crash of global financial markets in 2008 were caused by a neoliberal apotheosis of markets, as if, god-like, they were all-knowing. Theories of ‘efficient markets’ and ‘rational expectations’ premised that investors had perfect information, despite no one knowing for months after the crisis how much had been lost by whom, how or where. US Treasury Secretary Larry Summers had cut the reserve requirements of banks to less than 2% and in 1999 repealed the New Deal Glass–Steagall Act, which had separated commercial banking from speculative finance. Federal Reserve chair Alan Greenspan had...

After the government rescue package for the UK banking sector in 2008–09 the government’s fiscal deficit rose substantially and quickly to over 12% pa and there was a consensus that there needed to be an adjustment to reduce the fiscal deficit and the total government debt of the UK. However, there was no consensus over the timing of the reduction, the depth of that reduction or the actions that should be taken to achieve it; as Hunter (2009) pointed out, ‘it is not whether the belt gets tightened, but which notch it gets pulled to’. This chapter examines some...

Local authorities have been implementing cuts to public service budgets since 2008, but the Conservative–Liberal Democrat Coalition government’s plans to cut over £6 billion in 2010 added pressure to an already stark situation. While some services have been protected at the centre (such as health), other local budgets are identified as being at severe risk – in particular adult social care services. Other local public services facing pressure include swimming pools, libraries, speed cameras, community centres and other cultural activities. In some areas, warden services in elderly social housing schemes continue to be threatened; and while these are not...

Local authorities across the country have been dealing with the first budget process in which the impact of the recession has played a major influence. Not that previous years have been easy; there has since 2004 been an expectation, following Sir Peter Gershon’s report, that authorities would be able to identify considerable economies on a year-by-year basis, primarily through increasing use of IT, especially in back-office functions. For the past few years, grant settlements have built in this expectation and, given the problems of raising additional revenue from council tax (a 1% increase in revenue expenditure typically requires a 4%...

The ‘efficiencies’ debate in political discourse, alluded to already in this book, imagines there to be a number of ‘back-office’ activities that can be cut without impacting on ‘front-line’ services. Perhaps what is needed, though, is a more radical overhaul of the design and delivery of public services. The aim of this chapter is to show how an ideological approach to managing the public sector has driven it in the wrong direction. Between 1999 and 2009, public services received a 55% real-terms funding increase, as financed by an increase of 5% of GDP in public expenditure. This investment was not...

There is a political consensus. The three main parties in England support the principles of choice, empowerment and personalisation for users of public services. They also recognise that there is a growing need for these services. At the same time, there is an acceptance that there must be severe public expenditure controls over the next decade to deal with the impact of the financial crisis and to plan for the upturn. The Conservative–Liberal Democrat coalition agreement in May 2010 prioritised deficit reduction and a commitment to £6 billion cuts in non-front-line services in 2010–11. Nevertheless, they contend that...

The recession and subsequent public spending squeeze have focused attention on how local government will respond to predicted increases in levels of need among local communities while at the same time working within reduced budgets. The Conservative–Liberal Democrat Coalition government’s determination to implement £6 billion of efficiency savings in its first year in office indicates an intensification of the pursuit of ‘efficiency gains’ within local government and across local public services that was begun under the previous Labour administration. In this context the coalition’s initial agreement published on 11 May 2010 to ‘promote the radical devolution of power and...

The essential ingredient in the understanding of money and exchange of goods and services is trust (Ferguson, 2008; Lonergan, 2009). It is also vital for social order and good governance. Stiglitz (2010, 289) says that ‘trust is the grease that makes society function’. Society, however, feels let down by the systems of the market that resulted in the credit crunch, leading to closure of businesses, increasing unemployment and house repossessions; and yet bankers’ bonuses were still eye-wateringly large in 2010, as a result of profits made following quick recovery on the markets. British people also felt that their trust in...