There is an air of unreality about the whole Conservative leadership election.
The issues that the leadership candidates want to talk about – presumably because that is what other Conservative MPs care about – seems completely divorced from the concerns of ordinary people.
The fact that we are living through a severe cost of living crisis seems to have passed them by. In the first leadership debate, their answers on what they would do to help were embarrassingly thin and it was almost as though they were surprised to be asked about it.
But if they appear clueless about how to help individuals and families struggling with rapidly rising bills, I have seen even less evidence that they are aware of the huge strains soaring inflation is putting on public services.
Councils across the country are facing massive financial challenges. Already hit hard by – and still not fully recovered from – Covid, local government finances are now being eroded at an unprecedented rate by rising prices.
Ipswich Borough Council is no exception. We are facing a quadruple whammy of issues.
The prices of goods and services the council buys are rising much higher than predicted by the Office for Budget Responsibility when we set our budget in February. Construction inflation, in particular, is running way ahead of general inflation due to a shortage of both materials and labour.
On top of this our large-scale building projects are usually funded by borrowing and, as interest rates are rising, this makes financing them more expensive and may begin to make some of them uneconomic.
We are currently insulated from high energy prices because we have a fixed price supply contract that runs until October next year, but it is inevitable that our energy bills will go up when that contract ends. To give an indication of what this might mean, the current market price for gas is seven times what the council is currently paying.
Councils have also been advised by the local government pay national negotiating body to make provision for a higher pay rise for our staff than originally budgeted for in February. Before anyone gets carried away, even this higher pay rise would still be less than half the current rate of inflation so effectively a pay cut for our staff.
We estimate that all these factors taken together will add at least an extra £6.4million to the council’s bills over the next four years.
This is why we have had to take urgent action to try and stabilise the council’s finances.
We have reviewed all our large-scale projects, either delaying or cancelling some to cut borrowing costs.
We are reviewing all services the council provides to see whether they can be run more efficiently, whether more income can be generated or whether the council should be providing them at all.
And we have proposed some immediate savings including returning the management of Northgate Sports Centre and the maintenance of highways verges to Suffolk County Council.
Maintaining highways verges has always been the responsibility of Suffolk County Council but it has historically been carried out by Ipswich Borough Council on their behalf. Unfortunately, they have never paid us enough to maintain Ipswich’s verges properly and this is something we make a loss on. With first Covid, and now inflation, hitting our finances hard we can no longer afford to keep subsidising the County Council.
None of the areas where immediate savings are proposed will have a direct impact on the household finances of Ipswich residents. Services which help with the cost of living such as free of charge brown bins and the free young person’s Summer iCard will be protected.
But the longer inflation remains high the more likely it will become that we will have to impose major cuts to services.
Only the Government can stop this happening by providing extra financial support to councils – as they did during Covid.
Unfortunately, they have so far given no indication that any additional help is on the way and, with the whole Government distracted by the leadership contest, I am not sure anyone in Westminster is even giving any thought to this.
Indeed, with pretty much all the Conservative leadership candidates arguing that government spending should be slashed to pay for tax cuts, it seems unlikely that any help will be forthcoming, whoever becomes Prime Minister. We could even see the existing inadequate level of support cut.
If that happens then we are going to see a wave of cuts to council services that will make those imposed by David Cameron and George Osborne a decade ago seem like small beer in comparison.