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Local and national government have made a positive initial response to the recession says an Audit Commission report, but it warns that councils should prepare for worsening social impact as unemployment rises. Demand for benefits, welfare and help with debt are growing, and social problems such as domestic violence and mental ill-health are expected to follow as the recession deepens.
 
The new national report When it comes to the crunch... also describes a longer-term 'third wave' of recession, which would see most areas bounce back while others continue to flounder.

This is the second in a series of national reports on how local authorities are responding to the recession. The first Crunch Time?, published last December, looked at the impact on local government finances. Now today's report exposes the broader impact on councils, on their services, and on the communities they serve.

• Most councils face extra demand for benefits, welfare and debt counselling
• One in three already has extra pressure on school places, social care and mental health services, and almost all are anticipating these
• Although the private sector is hardest-hit, redundancies have already begun in nearly half of district councils and a third of all others

While it is too early to say which government initiatives will prove to be the most effective, the report finds that too few national schemes make the most of councils' grass roots local knowledge.

It notes that government acted quickly by introducing recession-busting schemes to help business, mortgages and employment. But locally-tailored interventions, the report says, can produce quicker and better results. Among those highlighted are:

• Banking on Essex - a joint venture between Essex County Council and Santander to help keep local businesses afloat by offering loans and advice
• Wakefield Metropolitan District Council - a mortgage assistance scheme providing interest-free loans to homeowners with mortgage arrears to prevent homelessness
• Northumberland Council - part funding of a management buy out of Cheviot Foods in Amble, securing 190 local jobs.

Audit Commission Chief Executive Steve Bundred says: 'Local government's initial response to the recession has been positive and supportive of their local economies. But councils need to move from being reactive to proactive, and prepare to combat a wide range of resultant social problems. When it comes to the crunch, those with sound plans focused on local issues, and delivered in partnership, will stand the best chance.'

'The arrival of Comprehensive Area Assessment is timely as it will challenge the effectiveness of local partnerships in these testing conditions. Two out of every three councils already say that crunch pressures are forging stronger partnership working.'

The challenge to government is to work effectively with local authorities and design clear, simple schemes that exploit councils’ local knowledge and contacts. The challenge to councils is to build their capacity to tackle their own local problems, and deploy resources through local partnerships. Wigan Metropolitan District Council has worked with health partners to address recession challenges. The Local Strategic Partnership has engaged with GPs to ensure patients are offered employment or debt advice rather than automatically prescribed drugs when presenting for stress-related complaints.

The report says most councils have taken sensible, low risk steps to support businesses, help labour markets and support vulnerable households, but expect the impact to be modest. Some councils, however, have been more ambitious and have coherent action plans agreed with their local partners, including tailored interventions to support important local employers. These can be effective, but risky. Some councils, often those with experience of widespread deprivation, have the capability and resources to develop these and manage the risks, but the majority do not.

Describing recession as a series of 'waves' (see diagram at the bottom of the page), the report finds that the country is still in the grip of the initial economic downturn that caused business failures, bankruptcies and unemployment, but will soon be facing a second wave of consequences triggered by long term unemployment. With families and individuals under stress, most areas are likely to witness increasing social problems including domestic violence, alcoholism, drug addiction, and young people unable to find jobs. Councils may also have to deal with more fly-tipping, abandoned cars and stray dogs. 

Areas of England that were already deprived, such as former coalfields and those with declining or defunct industries, have borne the brunt of the downturn so far. Manufacturing, finance and distribution sectors have seen sharp falls and greatest unemployment, and lower skilled workers have been worst affected.

Steve Bundred adds: 'Of course none of us can be certain about the future path of the economy, but if the pattern of the last two recessions is repeated then unemployment may stay high for the next three years.'

Notes to editors

1. The report When it comes to the crunch... was compiled using methods including academic research, a survey of local authority chief executives carried out in May/June 2009 (with a high response rate of 55 per cent), structured interviews by Comprehensive Area Assessment Leads in over half of all single tier and county councils, and in-depth case study visits to 11 local areas.
2. In addition to Crunch Time? the Audit Commission has produced other relevant reports including A Mine of Opportunities (a study of the regeneration of the former English coalfields - December 08) and Room for Improvement (how councils can manage their assets better - June 09), and will soon publish Building Better Lives (strategic housing management).
3. The wave diagram of recession is a graphic representation of many of the issues raised in this report.
4. The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.
5. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies.
6. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.

For further information please contact:
Mark Nicholson, Media Relations Manager
Audit Commission, Millbank Tower, London SW1P 4HQ

Direct line - 0844 798 2135 or 020 7166 2135
24 hour press line - 0844 798 2128 
Mobile - 07813 038132 

E-mail m-nicholson@audit-commission.gov.uk