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Budget18: a local government perspective

Budget18: a local government perspective

🕔29.Oct 2018

It’s Budget Day, in case you didn’t already know, so Chris Game gives a local government perspective on the annual economic statement. 

A Monday budget – for Halloween-avoiding or debate-enabling reasons, who knows? But it is the first for 56 years, and the sad thing (for me, anyway) is that I remember more about that 1962 one than – well, let’s say the one before last. So, I’m sorry, Ed., but you must excuse a couple of paras’ reminiscence (a “couple”?!, Ed).

It would be nice if my impressive recall were due to my being one of the children whose ‘pocket money’ the hopeless Conservative Chancellor, Selwyn Lloyd, was instantly accused of stealing, by cutting purchase tax on cars, TVs and washing machines, while raising it on sweets, soft drinks and ice cream.

Nice, except by then I wasn’t really ‘children’. I was taking A-level Economics, we listened to the Budget on Mr Henderson’s (very large) portable radio, and had to make copious notes on it afterwards – ‘speculative gains tax’, Schedule A tax (don’t ask!), likelihood of it averting another catastrophic, Orpington-scale by-election loss to the Liberals, the lot.

So being on Monday is different, and also the now virtual disappearance of ‘budget purdah’ – the longstanding convention of secrecy surrounding not just tax changes, but most aspects of the Budget prior to its delivery.

It relaxed gradually with the changing culture of politics, but the effectively irreversible change came with the 2010 Coalition, and the necessity for the Chancellor both to finalise details further in advance, and to share them not just with party confidants, but with his Coalition enemies – I mean partners.

This year, then, the political classes have been speculating for ages and last week the actual leaking started, from the Chancellor himself: business rates relief for small businesses, money to rejuvenate high streets, excise duty ring-fenced for upgrading roads and motorways, etc.

This post, though, is about background, rather than content.  It’s also specifically focused on local government, which the Budget itself certainly won’t be – inevitably.

When the PM announced to the Conservative Conference – like a touchline-bound football manager shouting to players who can’t hear – that austerity would be brought to an end, it was assumed she meant the eight years of cuts in day-to-day spending on public services.

That will be the hugely tricky agenda not of this Budget – which is about, in the jargon, the total size of the envelope – but of next year’s Spending Review, which will divide up the envelope’s contents between the various government departments for usually a three-year period, though, as with everything, Brexit could change that.

It was the envelope, therefore – the bigger picture – that was the focus of the recent House of Commons Library briefing for MPs, and it was that briefing that prompted this post, to draw attention to some of the local ‘governmenty’ bits that somehow got de-emphasised.

The MPs’ briefing is centred around some easy-read graphs and charts, showing, for example, how since 2016 our economic growth rate has fallen behind those of both the US and Eurozone … but is now recovering “after a weak start to the year” (p.8); that consumer spending growth slowed sharply in 2017 … but has levelled off since; how the official unemployment rate is now lower than at any time in history – sorry, got carried away, since 1975 (p.14).

When you get past this ‘Always-look-on-the-bright-side’ gloss, though, the picture’s not great. Adjusted for population change, real terms spending growth for the coming few years is projected essentially to flat-line (p.32).

That’s total spending, of course, which is better than most of the past few years, but not necessarily if you happen not to be one of the areas that successive governments since 2010 have chosen to protect from spending reductions – like health, defence, education and overseas aid.

If your source of income is an unprotected department – like, say, Justice or Housing, Communities and Local Government – it’s a very different picture. Moreover, you have to go to the Institute for Fiscal Studies (IFS) to get it – see the left side of my illustration.

And the same goes for what may or may not happen next.  For example, the MPs’ briefing notes the PM’s ‘70th Birthday gift’ to NHS England of a real terms cumulative increase of around £20 billion by 2023/24 (p.36), and speculates about how it might be paid for.

There is certainly scepticism, with reference to the Office for Budget Responsibility’s view (p.38) that “there may not be much of a medium-term ‘Brexit dividend’, once the UK’s financial settlement(s) are taken into account”, and “Brexit is more likely to weaken than strengthen the public finances overall.”

Whereupon the briefing notes that even the PM has acknowledged that “taxpayers will have to contribute a bit more in a fair and balanced way to support the NHS we all use”.  It then offers a limited illustration of how this might be done: ten possible tax changes, yet no mention of a ring-fenced or hypothecated NHS tax, as discussed recently in these columns.

What the MPs’ briefing doesn’t have a chart or graph for, though, are the massive financial implications that NHS Birthday gift could have over the coming five years on the services reliant on funding from those presumably still unprotected departments. So thanks again to the IFS, for the right side of my illustration.

Which I think is pretty self-explanatory, and allows me to move immediately on to what local government might offer on its own behalf in a Budget briefing for MPs, which in broad terms at least is easy.

First, because the Local Government Association (LGA) does of course produce its own Budget Submission to HM Treasury, rather than MPs – albeit slightly complicated in this instance by its being prepared in September, and therefore before the news that the Housing Revenue Account borrowing cap was about to be lifted, or indeed that austerity generally was being brought to an end.

And secondly, because any such submission/briefing would necessarily be an updated version of the case the LGA has been making throughout most of the reign of austerity – and made by, it should be remembered, Conservative Chairs for all but one year in the middle, and for the past four by Lord Porter, an elected councillor as well as an unelected Peer.

As suggested above, while today’s Budget is obviously important, the even bigger focus for local government and the multifarious services it provides is next year’s Spending Review, and the LGA have had that date (whenever) firmly in its sights since the summer, when it launched its ‘Moving the conversation on’ campaign with a paper on Local Government Funding.

Familiar as the headlines should be by now, they would still have seemed barely credible even a few years ago, and one wonders if even people like MPs really grasp their seriousness and full implications:

  • By 2020, local authorities’ core funding will have been cut by nearly £16 billion over the preceding decade;
  • Which means councils will have lost 60p out of every £1 the government had provided to spend on local services in the last 8 years; and
  • Despite the slippage of the Government’s original plans for local government as a whole to retain 100% of its business rates income by 2019/20, 168 councils will receive no Revenue Support Grant income at all.

Personally, I feel I’ve been updating my ‘Core Funding Cuts’ PowerPoint slide for so long that I start seeing it even when I’m out of the country. Like this past summer in Peru, where, featuring prominently in every souvenir shop, were ‘Genuine Peruvian Pan Pipe Flutes’, bearing an unsettling resemblance to my slide.

And then I hear someone who really ought to know better – a former Chancellor of the Exchequer, Ken Clarke – on Sunday’s ‘The World This Weekend’ – and I get an idea. Clarke was offering unsolicited advice to the present Chancellor:

You’ve got to keep your head. You don’t have to take account of the warnings of mayhem which you get every year … I’ve heard all these public services, carrying on about how they’ve never had a problem like this before, for the past 30 or 40 years.

Which prompted two thoughts. First, when are you finally going to retire? Second, would sending every MP a 9-pipe bamboo flute decorated with the appropriate statistics be more effective in getting the point home than yet another briefing paper?

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