Richard Harbord: The Budget’s missed opportunity
News that a penny had been taken off Beer Duty will have excited all those with civic catering and outside lettings, but was there anything else to excite local authorities in the budget?
The budget promises that austerity will end a year earlier than planned. Public spending in 2019/20 will increase in line with increases in the overall economy. However, at that time public spending as a share of national income will be the same as it was in the year 2000.
There is, however some confusion over the extent of spending cuts in the years up to 2019/20 and whether or not they are expected to be more severe than already announced. The chancellor, George Osborne, announced a further £30bn in savings – £13bn from central government departments, £12bn from welfare and £5bn from a clampdown on tax avoidance. The cuts in welfare have yet to be identified.
CIPFA commented that in “2015/16 alone central government support for councils will fall by 23% on top of the 50% they have already suffered”. Though there was one bit of good news which announced £1.25bn for a major expansion of mental health services for children.
But business rates will be big issue for local authorities. On the day before the budget a consultation paper on rates was published. The headline intention is to ensure that business rates are fit for purpose for the twenty first century. The closing date is June and the promise is to deal with the conclusions in the budget next year. Personally, I think the paper reads very badly, is lightweight and lacks real vision.
It says government expects business rates to remain a property tax and that it must achieve a similar quantum to the current position. It must indeed, because with revenue support grant just about gone the whole financing for local government is dependent on business rates. I expect broadly the status quo with changes to the valuation frequency and perhaps technical changes to the methods of valuation but some of this was covered in the Administration of Business Rates Consultation which ended in February 2015.
What wasn’t in the budget was an undertaking given by Eric Pickles at the LGA conference to increase retention of business rates to 70% by 2016/17, and 80% by the following year.
There is to be consultation on a new relief for local newspapers. And there were also various announcements about ring fencing business rates growth. These include measures for Barnet and the GLA to support the Brent Cross Regeneration, and business rate pilot schemes for Greater Manchester and Cheshire East as well as Cambridgeshire and Peterborough.
But the unanswered question, nowhere discussed in the Budget or elsewhere, is the effect of this devolution on the rest of local authorities and any consequential changes to top-ups and safety nets. This is a piecemeal devolution of growth in business rates and not sustainable. The review must do away with some of the uncertainties the current system gives.
The Office for Budget Responsibility in its report on the budget says that “the budget leaves a roller coaster profile for implied public spending through the next parliament; a much sharper squeeze on real spending in 2016/17 and 2017/18 than anything seen over the last five years followed by the biggest increase in real spending for a decade in 2019/20.” This, they say, is the government’s agreed position, but they note that both the biggest parties would pursue different policies if they were to govern alone.
The LGA points out that the great omission from the budget is any additional resources for adult social care, a service currently in crisis for many local authorities. There is actually another big omission, which is that there is nothing about additional funding for the NHS. One imagines this will be dealt with as part of the departmental budget changes which, in itself, is bad news because it means that any increases can only come from local government budgets.
The LGA is enthusiastic about devolvement but feels that greater retention of business rates growth should be available to all authorities.
This may just be me, but the budget has a lot of detail about individual schemes in different areas and in particularly the Housing Enterprise Zones etc. Could this be in anyway connected to there being an election I ask myself? Normally such detail is reserved to subsequent detailed departmental reports, or forms part of the next public expenditure round. I also note that around 30 consultation documents were issued by the Treasury and DCLG in the three days around the budget.
In conclusion some individual local authorities will be pleased with the devolution offered to them but the vast majority will see a missed opportunity. It was interesting to see that the leader of Manchester said: “The north cannot afford another five years of Tory government.” Whilst he had worked pragmatically with the chancellor George Osborne, “we do not delude ourselves that the gains we have made are anywhere sufficient to compensate for the damage done by Tory austerity to our services and our communities”
The real changes will come after the election but there needs to be a more comprehensive strategy if local government as a whole is to continue with the vital role it has in its communities.
Richard Harbord is a consultant and former chief executive of Boston Borough Council.