Chancellor’s Autumn Statement 2022 – what does it mean for local government?
There was a need, the Chancellor said as he opened his Autumn Statement, to undertake a £55bn fiscal consolidation – with just under half coming from tax, and just over half from spending. Blaming global headwinds, he stated that the Office for Budget Responsibility predicts inflation will be 9.1% this year and 7.4% next year following the decisions taken today.
In delivering his statement, he outlined his three priorities: stability, growth, and public services. He consequently committed to “grow public spending, but more slowly.” This comes against a backdrop of rising prices eroding wages to reduce living standards by 7% in the next two financial years to 2023/24. We are now, as OBR says, in recession.
If the run up to this budget was heavy on laying the groundwork for “difficult decisions”, the actual statement was light on detail – particularly for councils and local areas. Here’s our snapshot on what it means for local government:
- Protecting department spending for the next two years – as anticipated, the Chancellor committed to the same departmental budgets announced at Spending Review 2021. This includes the Local Government Financial Settlement. The challenge is that these budgets are based on cash terms, so while there may be no actual cuts, unprotected departmental budgets will fall in real terms by £5bn-15bn by 2024/25. As a result, departments will need to make “efficiencies” to exist within these terms.
- Increasing budgets by 1% in the three years that follow – i.e., until after the next general election. Looking at the associated documents, though, this means that ‘departmental resource spending will grow at 1% a year in real terms. Departmental capital spending will continue at the same level in cash terms.’ This decision not to increase capital spend is likely to undermine the chancellor’s growth ambitions.
- Social care – an extra £2.8bn was announced for adult social care next year, some of which will be paid for by local authorities’ keeping the funding for implementing the now delayed social care charging reforms. The eagle-eyed among you will remember that this isn’t even half the £7bn gap in funding for 2023/24 identified by the Health and Social Care Committee chaired by Jeremy Hunt.
- Council tax – blink and you’ll miss it, but council tax “flexibilities” were referenced to fund some of these increases. The associated documents state that councils will be able to raise council tax by 3% without triggering a referendum. Local authorities with social responsibilities can also raise the social care precept by up to 2%.
- National living wage rising to £10.42 – while clearly welcome news for those on low incomes during the cost of living crisis, it will put additional strains on budgets.
- More devolution deals – new deals were announced for Suffolk, Cornwall, Norfolk and an area in the North East, meaning that nearly half of the country will be covered.
- Fewer investment zones – the flagship policy of the last Government is to be ‘refocussed’ to rely on the research strengths of local areas. It means that previous expressions of interest will not be taken forward.
New Local will be analysing the impact of today’s announcement in more detail over the following weeks. Keep an eye on our Twitter feed for the latest updates.
Photo credit: ‘Prime Minister and Chancellor meet B5 Business Group members’ by Number 10 on Flickr. CC BY-NC-ND 2.0.
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