Bristol City Council's £30m black hole

Imagine a typical family of four in Bristol. Dad gets up and goes to work by driving his car along streets, which are maintained by the city council.

Mum waves goodbye to the eldest of two children, who walks to school, which is run by the local education authority, the city council.

Meanwhile, Mum takes the younger child to nursery, which again is run by the city council.

On the way home, she calls in to see her mum, a frail pensioner who needs home care help that is provided by the city council.

She manages to find time to call in at the library before school finishes.

And in the evening, if they are not too tired and they can afford a babysitter, she goes with her husband to the Colston Hall to see a concert.

Both the library and the Colston Hall are run by the city council.

Whatever we do, whatever our circumstances, the city council has a part to play in our lives.

And now it is facing a financial crisis, mostly due to the recession.

The council's top officers say they must find estimated cuts of £30 million during the next three years.

This might not sound a lot when you consider the council's total net budget this year is more than £365m.

But when you are told year-on-year that services have been pared to the bone, it makes you wonder where the savings can be made. In the past, the traditional way of making cuts is to ask each department to find savings of, say, two or three per cent.

Managers pore over their budgets and try to protect services as much as they can without losing staff.

Inevitably, the end result is usually a fudge between the two.

The council's top officers have now decided to take a different approach.

Instead of "salami slicing" across the board, they want to restructure the council.

As an expert from the Chartered Institute of Public Finance and Accountancy (CIPFA) told me, money gets pumped in at one end and services appear at the other.

But, in the middle, the council is responsible for delivery – the way in which the services are managed.

The new way, then, is to start from the premise that services should, where possible, stay at the same level of quality and delivery.

But what changes is the way in which these services are managed.

It means change. It means "tough decisions" – a coded phrase that usually means job losses.

More than that, the level of cuts is likely to mean compulsory redundancies because it's hard to see how redeployment and natural wastage can cope with the level of restructuring that is required.

It has to be borne in mind that nearly 30 per cent of the council's costs is staff wages and salaries. It seems inevitable, therefore, that hundreds of jobs will eventually be lost rather than dozens.

The council has already carried out restructuring on its top tier of executives, which has made savings of £3m a year.

Second and third level officers have already had to reapply for their posts. Some have been successful while others have not.

Slowly, the process will work down through all the departments.

Some of them are already working very efficiently.

Take the housing benefit department as an example.

In one way, it is an exception to the rule because it has had to expand to deal with the dramatically rising number of people who qualify for benefit as a result of job losses due to the recession.

But I understand that working practices have been revolutionised in order to manage more efficiently the way claims are handled.

Council officers are looking at other ways to restructure. Another example is to create stronger links with health trusts so that shared responsibilities are carried out by one person or one team instead of two.

There are other areas of saving. One of these will be to cut down on consultants and agency staff.

The council's education department recently employed the services of a QC who cost more than £8,000 for a one-day public inquiry to deal with the realignment of a footpath. Costs such as this will be scrutinised more closely in future.

The council is fighting in the dark in one respect because it doesn't yet know what the size of grant it will receive from the Government.

Gordon Brown has decided that the level of public spending will not be announced until after the next General Election, which will have to be held by next May at the latest.

This means that the council's expected shortfall is based on estimates. It has come up with expected cuts during the next three years as £12m, £8m and £10m – a total of £30m for the period.

But the cumulative effect of these year-on-year savings will actually be £62m because the £12m from the first year is carried over to the successive years.

Politically, the dire financial situation could be a massive banana skin for the new Liberal Democrat administration, which won an overall majority for the first time at the local elections last month.

Council leader Barbara Janke said: "As a new administration, we are determined to lead the city in co-operating with all interested groups to put our case to Government for a fair deal for Bristol."

She is referring to the level of Government grant which comes to Bristol, traditionally lower than in other parts of the country.

The level of grant determines how much we pay in council tax each year to help run services.

This year, an average council tax payer must find £1,312 a year (excluding police and fire precepts).

The last word should perhaps go to the Audit Commission which gave the city council a two-star rating in 2008 (the maximum is four stars).

It said the council is "improving well" and "well placed to continue to deliver improvements for the local area". In other words, the city council might be facing a dire financial crisis but there is plenty of room for improvement.