Budget 2017: The only certainty for local government is continued uncertainty
This article was first published in Civil Service World.
The Budget was a mixed bag for local government. Councils face financial uncertainty after 2020, with grant funding still reducing, the definition of “fair funding” still pending and the prospect of business rates retention still dangling. The Chancellor recognised the priority to give businesses the ability to plan and invest with confidence, but no such assurance was forthcoming to council chiefs who must continue to grapple with uncertainty.
Instead we saw some tinkering with local revenues bases. The 100% business rates retention pilot for London shows this reform is still on the table, but a significant section of the speech was dedicated to acknowledging the declining legitimacy of the tax with businesses. The 100% council tax premium on empty homes is a welcome lever but given that the tax is based on 1991 property prices, it is increasingly decoupled from present demand realities. The need for more ambitious fiscal devolution if local government is to be self-sufficient in the future remains, despite the clear absence of political appetite.
Several announcements showed that the devolution agenda has life in it yet. A local industrial strategy in Greater Manchester, a second devo deal for the West Midlands and a new deal for North of Tyne are all welcome developments. Yet the government response still hasn’t matched the scale of appetite that exists in many parts of the country, particularly two-tier areas. There is a need to shift out of the ad hoc, case-by-case approach to devolution and set out a transparent framework so that all areas know the rules of the game. This should also engage all departments in Whitehall to consider how devolving existing funding can generate greater impact with finite resource across the full range of service delivery areas. Devolution should also be fully integrated into the Industrial Strategy instead of just an add-on to it.
The package of housing measures appears to be both an ambitious and a pragmatic attempt to address the need to boost housing supply across the spectrum of need. Councils have long been calling for recognition that they can play a more active role, and the announcement that the HRA borrowing cap will be removed in high demand areas will be welcome. We await further details of this – the prospect of implementation delays and bidding for the entitlement risk dampening the immediate impact. And the definition of “high demand” will be important to establish – housing need varies from place to place, for example urban and rural. Local government as a sector should have a preference for the same treatment across the board, rather than rules for some and not others. But that the principle that removing the borrowing cap can play a role in increasing supply has been recognised is good news.
Finally, the Budget was totally silent on two local services which are high on the priority list for councils: social care and children’s services. The beleaguered NHS was propped up again with £2.8bn revenue over the next few years and a £10bn capital boost over the next five, but the challenge of under-funded social care provision remains. The £2bn committed in March’s Budget has since been largely rerouted towards reducing hospital pressures from delayed transfers of care – an important, but only one dimension of a more complex overall problem. And the LGA has outlined a £2bn gap between resources and demand for children’s services which the government has so far not responded to. Care of our vulnerable elderly and children is a priority for councils – this needs to be matched by Government commitment.
The Chancellor ended with a well-worn political catchphrase “forward, not back”. Another springs to mind for this Budget “much done, much still to do.”
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