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What does local government need from the Autumn Budget?

October 23, 2024  

Jessica Studdert identifies three shifts local government needs from the first fiscal event of the new Parliament.

The long-awaited Budget on the 30th October will be the first test of the Labour government’s promise to “end sticking plaster politics”. Although the short-term fiscal outlook is tight, reports that Chancellor Rachel Reeves will change borrowing rules to increase headroom for capital spend indicate a shift towards a longer-term approach to investment.

For many councils, the chronic short-termism and local fragility that policy decisions have created over the years is now biting hard. New Local has been partnering with the International Public Policy Observatory to explore how local authorities are responding to financial pressures. Many are thinking differently and developing new routes to achieve impact by working with communities and prioritising prevention. Understanding how local practice is evolving has insights for how public finances can achieve more local impact across public services.

So, what does local government need from the first fiscal event of the new Parliament?

1. A proportion of new capital investment should be directed towards local government for regeneration and to support wider public service sustainability

The new headroom created for capital investment is expected to be the centrepiece of the Autumn Budget. Under the previous government, council plans for capital investment projects via Levelling Up and other funding pots were subject to competitive bidding, which Parliamentary scrutiny found failed to spend promised funds and lacked transparency. As a consequence, regeneration plans have been prone to uncertainty and delays, creating barriers to effective community involvement. As our recent research has argued, allocating a proportion of capital spend directly to local government would be a good way of ensuring visible, relatively quick returns on investment in town centres and high streets across the country.

There is also a strong case for increasing capital expenditure to local and combined authorities to support wider sustainability, where investing upfront in new buildings can catalyse achieving better outcomes and alleviating revenue spend pressures. For example, partnerships between local and combined authorities are emerging, led by local initiative, to create new children’s homes, as is happening in Greater Manchester and Liverpool City Region (the latter an incredible example of co-production with care experienced young people). Measures should seek to empower the local state to intervene more systematically in the private sector dominance of provision for adults and children’s social care – both to arrest skyrocketing placement costs and declining quality relative to third or public sector provision.

2. *Some* short term relief on revenue funding combined with a signal that longer term renewal is on the way

Whilst there is realism within the local government sector that there is no prospect of significant increases in revenue funding, this needs to be matched with realism in Government that many councils are looking at a significant funding shortfall next year, estimated at £2 billion. This will have real life consequences for decisions over services: the near-term funding challenge can only be met by making further cutbacks. Recognition that there is an imminent funding shortfall ahead of next year’s spending review would be welcome.

The current funding challenge is twofold: insufficiency combined with uncertainty.

In the medium to longer term, the prospect of multi-year spending reviews with minimum three-year planning horizons for local government is very good news. The current funding challenge is twofold: insufficiency combined with uncertainty. If there are constraints in addressing the former quickly, the fixing the latter with measures to stabilise is important to get on with. It takes an enormous amount of internal resource and capacity to constantly have to reassess scenarios dependent on different settlements, or to keep staff on temporary contracts due to the lack of guaranteed funding. Creating funding stability will enable more effective planning and should mark the beginning of a wider shift towards a long-term approach to local renewal. This certainty will have a positive knock-on effect on funding for local voluntary and community sector organisations whose survival is umbilically linked to local government viability.

3. A clear direction of travel towards deeper local reform and prevention

The Chancellor’s “Black hole” speech  before the summer set out the need to create a mission-led, reform-driven approach to government, “with a greater focus on prevention and the integration of services at a national and local level”. The Autumn Budget is an opportunity to develop what this means in practice. As New Local has previously set out, there is significant scope to reform how central government funding flows into place. Currently impact is held back by inefficient silos, fragmentation between different service remits and systemic incentives to react to problems rather than invest upfront in prevention.

The Government should kick off a phase of rapid learning about existing best practice from places including Gateshead and Essex

The headroom created by the prospect of longer-term funding certainty should be accompanied by a clear roadmap for testing and learning to progress place-based collaboration and reform. The Government should kick off a phase of rapid learning about existing best practice from places including Gateshead and Essex, combined with piloting new approaches and removing barriers by measures such as data-sharing between services. This needs to run in parallel with the more fiscally restrained measures of the early years of a Parliament, with a view to informing a more wholescale transition to place-based, preventative practice by the end of the Parliament. The approach could be led by the Cabinet Office as part of the wider shift to mission-led government and partnership with local areas, but would also need to feed directly into the Treasury to assure that the best way of holding areas to account is via progressing outcomes rather than micro-stipulating outputs.

While the pressures on public finances are real, there remain significant opportunities to signal and begin to shift towards more effective and sustainable ways of working. These will need to develop and grow during the course of the Parliament, so it is essential that they start straight away.


Photo credit: ‘The Chancellor meets with the British Infrastructure Taskforce’ by HM Treasury on Flickr. CC BY-NC-ND 2.0.


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