New research from CIMA, in partnership with Bocconi University and SDA Bocconi School of Management, has shown the financial crisis of 2008 forced local governments to update the way they manage their finances so they could be more resilient and better able to meet the needs of their community, despite cuts and increased demands.
The report, ‘Government financial resilience under austerity: the case of English local authorities’, looked at how councils managed their finances over ten years. It shows that prior to the crash most local authorities’ approach to financial management had been focused on economy, efficiency and effectiveness.
As a result of the crisis, local governments had to rethink their approach to financial management, at this point the language of resilience became fundamental to success. The report shows councils found a more integrated approach that linked strategy and operations to financial management, to be the key to planning for and coping with an uncertain future.
The report focused on four local authorities: Manchester, Warrington, Wigan and Derbyshire. It showed councils such as Warrington and Manchester have focused on making sure they are self-sufficient.
Wigan council took a closer look at how they could anticipate and better cope with changing environmental conditions. Meanwhile Derbyshire council’s strategy was to ensure they tried to drive out inefficiencies in a variety of ways including, using and allocating reserves and increasing or introducing fees.
Rebecca McCaffry, CIMA’s public sector technical specialist, said: ‘Financial resilience is essential to maintaining the delivery of public services in today’s challenging economic times. We can see from this research that the route to financial resilience requires a combination of approaches.
‘To continue to see improvements, local authorities should ensure these are continually adapted and updated to reflect the changing environment. This will require strong leadership and a cohesive approach.’
Although the local authorities in the report were confident in their ability to cope with current challenges, the research showed they are concerned about future cuts. They identify a number of strategies that they will most likely need to engage in order to remain resilient, including:
- Improving financial self-sufficiency.
- Decision making in partnerships.
- Joining up services and multi-agency working.
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