IHE ACADEMIC REGISTRAR Room 15 UMVE3SI7Y OF LONDON SENATE HOUSE MALtT STREET LONDON VVC1E 7HU .*■ ^ THE MAKING OF SPENDING CUTS IN LOCAL GOVERNMENT: A CASE STUDY OF FOUR ENGLISH LOCAL AUTHORITIES, 1984/85 A thesis submitted for the PhD examination (London School of Economics and Political Science, University of London) Stephen Cope May 1994 UMI Number: U062742 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U062742 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 T i-V^S £ S F ^ j ACKNOWLEDGEMENTS I would like to acknowledge my deep gratitude to Professor George Jones of the London School of Economics and Political Science for his constant flood of advice and generous stream of support he gave me while preparing for and writing this thesis. Also, I would like to thank the many councillors and officers of Bedfordshire County Council, Kent County Council, Knowsley Metropolitan Borough Council and Stockport Metropolitan Borough Council, and others, for their kind cooperation in undertaking the research - please see the list of those interviewed in appendix A. Finally, I wish to dedicate the thesis to my mother and father. 3 ABSTRACT The thesis focuses on the making of spending cuts in local government in the mid-1980s. It examines how four English local authorities - Bedfordshire County Council, Kent County Council, Knowsley Metropolitan Borough Council, and Stockport Metropolitan Borough Council - made spending cuts in the financial year, 1984/85. The research is based on a comprehensive set of interviews of the significant actors in each of the four local authorities and an examination of the relevant documents produced by the local authorities, plus an extensive literature survey. After exploring the significant methodological problems in defining and measuring local authority spending, the thesis examines to what extent the four local authorities cut their spending, why they curbed their spending, and how they made spending cuts. Furthermore, it looks at specific case studies where local authorities cut their spending, including, for example, decisions to contract-out school cleaning, to terminate grant funding of sheltered housing, and to work with a voluntary organisation in providing day care for the elderly. The thesis outlines the major findings of the research, compares the research findings with those of other research projects, and constructs a theory of cutback management in local government. This theory challenges many of the conventional wisdoms surrounding cutback management. Both the dominant rationalist and incremental models of cutback management are explored and tested in light of the research evidence. The thesis finds that both models provide only limited explanations of cutback management in local government. As a result of their theoretical shortcomings a refined model is formulated, which provides a far more plausible basis upon which to understand cutback management in local government. The thesis offers both new empirical and theoretical analysis of the making of spending cuts in local government. 4 TABLE OF CONTENTS Chapter Page PART A: SETTING THE SCENE 1. INTRODUCTION 10 Aims of thesis 12 Structure of thesis 15 Methodology of research 17 2. THE ANATOMY OF SPENDING CUTS IN LOCAL GOVERNMENT 23 Misunderstanding local government spending 24 Defining local government spending 49 Understanding local government spending 84 3. SPENDING CUTS IN LOCAL GOVERNMENT: CUTS? WHAT CUTS? 95 Cutting local authority revenue spending 97 Cutting local authority capital spending 132 Fiscal stress in local government 146 PART B: EXAMINING THE SCENE 4. CUTBACK MANAGEMENT IN FOUR LOCAL AUTHORITIES 181 The rise of cutback management 182 Making cuts in revenue spending 186 Making cuts in capital spending 230 5. THE DISSECTION OF A SPENDING CUT 245 Rescuing the case study 247 School cleaning in Kent 252 Cutting by privatising 276 5 PART C: EXPLAINING THE SCENE 6. CUTBACK MANAGEMENT IN LOCAL GOVERNMENT: A RATIONALIST VIEW 289 Rationalist model of decision-making 290 Rationalist model of cutback management 298 Rationalist theory of cutback management 332 7. CUTBACK MANAGEMENT IN LOCAL GOVERNMENT: AN INCREMENTAL VIEW 335 Incremental model of decision-making 336 Incremental model of cutback management 343 Incremental theory of cutback management 378 8. CONCLUSION 381 Rationalist and incremental decision-making compared 382 Rationalist and incremental cutback management compared 387 Theorising about cutback management in local government 405 APPENDIX A: INTERVIEW PROGRAMME 419 BIBLIOGRAPHY 424 6 LIST OF TABLES AND DIAGRAMS Table Page 1.1 Profile of Bedfordshire CC, Kent CC, Knowsley MBC and Stockport MBC, 1984/85 18 2.1 Public Expenditure in Britain, 1974/75 - 1984/85 35 2.2 Four Measurements of Local Government Spending, 1984/85 46 2.3 Net Spending Cuts of Four Local Authorities, 1984/85 54 2.4 Budgeted and Actual Spending of Four Local Authorities, 1984/85 63 2.5 Local Government Expenditure in Britain, 1974/75 - 1984/85 79 3.1 Gross Revenue Spending of Four Local Authorities, 1978/79 - 1984/85 97 3.2 Gross Revenue Spending of Four Local Authorities, 1978/79 - 1984/85 98 3.3 Index of Gross Revenue Spending of Four Local Authorities, 1978/79 - 1984/85 99 3.4 Gross Revenue Spending of Bedfordshire CC, 1983/84 - 1984/85 101 3.5 Budgeted Variations of Bedfordshire CC, 1984/85 102 3.6 Budgets of Party Groups of Bedfordshire CC, 1984/85 103 3.7 System of Expenditure Targets and Grant Penalties, 1984/85 105 3.8 Gross Revenue Spending of Kent CC, 1983/84 - 1984/85 111 3.9 Budgeted Variations of Kent CC, 1984/85 112 3.10 Gross Revenue Spending of Knowsley MBC, 1983/84 - 1984/85 117 7 3.11 Budgeted Variations of Knowsley MBC, 1984/85 118 3.12 Gross Revenue Spending of Stockport MBC, 1983/84 - 1984/85 124 3.13 Budgeted Variations of Stockport MBC, 1984/85 125 3.14 Gross Capital Spending of Four Local Authorities, 1978/79 - 1984/85 132 3.15 Gross Capital Spending of Four Local Authorities, 1978/79 - 1984/85 133 3 .16 Index of Gross Capital Spending of Four Local Authorities, 1978/79 - 1984/85 134 3.17 Index of Planned, Allocated and Actual Capital Spending in a Sample of Local Authorities, 1981/82 - 1983/84 140 3.18 Breakdown of Gross Revenue Spending of Four Local Authorities, 1983/84 - 1984/85 147 3.19 Breakdown of Real Spending Increases and Decreases of Four Local Authorities, 1983/84 - 1984/85 148 3 .20 Gross Revenue Income of Four Local Authorities, 1978/79 - 1984/85 155 3.21 Share of Gross Revenue Income of Four Local Authorities, 1978/79 - 1984/85 155 3.22 Share of Gross Revenue Income of Local Authorities in England, 1980/81 - 1984/85 156 3.23 Rate Income and Rate Support Grant of Local Authorities in England, 1980/81 - 1984/85 157 3.24 Rate Income and Block Grant of Four Local Authorities, 1978/79 - 1984/85 158 3.25 Gross Capital Income of Four Local Authorities, 1978/79 - 1984/85 162 3.26 Share of Gross Capital Income of Four Local Authorities, 1978/79 - 1984/85 163 3.27 Changes of Revenue and Capital Spending of Four Local Authorities 169 4.1 Policy Planning and Budgeting Process of Knowsley MBC, 1984/85 209 8 4.2 Analysis of Net Spending Reductions Proposed by Committees of Knowsley MBC, 1984/85 213 4.3 Index of Planned, Allocated and Actual Capital Spending of Local Authorities, 1983/84 232 4.4 Capital Programme and Block Allocations of Kent CC 233 5.1 "Savings from Contracting-Out” 264 5.2 Costings of 'Savings* of Contracting-Out of School Cleaning, 1984/85 266 5.3 Survey of Standards of Contract Cleaning in Kent CC's Schools and Colleges 270 6.1 Competing Rationalities of the Decision to Cut Spending on Warden Schemes in Sheltered Housing 320 Diagram Page 6.1 Rationalist Model of Decision-Making 291 8.1 Dimensions of the Rationalist and Incremental Models of Decision-Making 386 8.2 Organizational Typology Based on Dimensions of Vulnerability 401 8.3 Ladder of Cutback Management 404 PART A; SETTING THE SCENE CHAPTER ONE INTRODUCTION 11 Before the 'IMF Crisis* of 1976 Tony Crosland, the Secretary of State for the Environment, announced to local authorities:1 "The party * s over." With the election of the Thatcher Government in 1979 Michael. Heseltine, the Secretary of State for the Environment, proclaimed in September 1981 that it was "closing time" for growth in local authority spending.2 In July 1982 Leon Brittan, the Chief Secretary to the Treasury, appealed for "local authority spending to be contained within limits set by what the nation can afford."3 In 1988 Nicholas Ridley, as Secretary of State for the Environment, wrote "it has been essential to constrain the growth of local authority expenditure".4 In February 1991 Margaret Thatcher, the Prime Minister, demanded that "local authorities of whatever political complexion should strain to keep down their public expenditure."5 In October 1992 John Redwood, as minister for local government, claimed it "is important that local, 1 Taken from Crosland (1982) p295. See also Cochrane (1993) p29; Henney (1984) p56; Page A (1980) pp31, 44; Taylor-Gooby (1985) p71; and Warman (1975) pi. There is considerable confusion over when Tony Crosland made this speech.