There’s nothing as bad as an underspend


Spend it, spend it now!

Being a ‘budget manager’ in local government can be a tough job. Some managers just have a few staff to look after and the budget is quite easy. However, at the other end of the spectrum some managers can have incredibly complicated budgets involving contracts, equipment, staff and innumerable other things to consider.

What makes the job even harder is that each manager has to predict at the start of each year how much they are going to spend and getting it wrong can have large consequences.

What confuses some people, including many of those I work for, is that under-spending that budget is just as bad as overspending it.

It is fairly easy to get your head around why an over-spend might be bad thing. The council would have to find money from its reserves or make further cuts to other services to make up for the extra money that you have spent. This would also have an impact on the budgets for the next year and generally put the council in a tricky situation.

However, under-spends can be just as bad and I think councillors are increasingly as intolerant of an under-spend as they are of an over-spend:

1)    If you’ve over-projected your budget then it is entirely likely that you’ve made cuts to other services to make up for it at the beginning of the year. And whilst it is possible to make further cuts to services if you find that you’ve over-spent it is very difficult to un-close a service or re-start a service if you find that you have under-spent half way through the year and therefore didn’t need to make those cuts. Under-spending in this context is really bad projecting and that can have a major impact on other services.

2)    There are also presentational problems. If you’ve under-spent your budget in year 1 and then claim you need the same money in year 2, possibly whilst other services are being cut, it becomes very difficult to justify those cuts. Trade Unions up and down the country are using council under-spends as a justification for opposing council cuts to staff terms and conditions. It’s difficult to justify a cut when you can’t even spend the money you already have budgeted for.

3)    The purpose of a local council is to provide services to the local community. Whilst in some cases a bit of prudence is to be welcomed often if you’re not spending all of the funding you’ve budgeted to provide public services then it is possible you’re not providing the same level of services you could do if you spent the whole budget.

Taken together, under-spends are often treated as being as bad as over-spends by a local authority. A good council will ensure that managers are as relaxed about a small overspend as they are about a small under-spend and as uncomfortable with a large under-spend as they are with a large over-spend.

It just all seems totally counter-intuitive!

Welovelocalgovernment is a blog written by UK local government officers. If you have a piece you’d like to submit or any comments you’d like to make please drop us a line at: welovelocalgovernment@gmail.com

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3 Comments on “There’s nothing as bad as an underspend”

  1. Judy Aldred Says:

    The thing is though is that almost all services at some point require capital investment as well as the usual annual budget. This capital requirement can vary year to year. The effort involved in trying to get more money in the year you need it is horrific. So much so that it is easier to just ask for more money every year. This inevitably leads to excess money being in the budget as you get close to year end so you then have to find a way to spend it.
    I dread to think how much money is being wasted in the public sector as a whole with lots of programme/services managers trying to spend their excess rather than showing an under spend.
    I do notice lots of roadworks tend to happen in February/March – or is that a myth….

  2. Squiggler04 Says:

    I think there is more to this than just an underspend. Think about how long it takes to get a new project off the ground. Think about if a project needs IT support, how long that takes to implement. Think about how long it takes if you need sign off from a large group of people at a formal meeting.

    Not always but sometimes, project money doesn’t get spent because Council systems are inefficient and don’t support us, spending money.

    I manage a budget. I have to make sure they are on the suppliers list. If they’re not, I have to get them to register. I then raise an order. Get that order signed off by two signatories. Raise the order online. Await approval. Then I can commission the service. This can sometimes take over 6 weeks if key staff are taking holiday.

    Sometimes, it feels as though the systems gang up on us to prevent us doing our jobs efficiently.

    I of course have left out inefficient and incompetent staff in the above… you can add on another 4 months to this process if they are involved!


  3. […] Having an under spend is not always a good position to be in. Some decent points are made via our friends from We Love Local Gov. […]


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