SPENDING REVIEW: Live to fight another year

By Jonathan Werran | 25 November 2020
  • Jonathan Werran

We live to fight another year – or to defer the hard choices for the next genuine multi-year government financial settlement when the medium-term bullet must be firmly bitten. 

That’s the main headline message for local government from today’s one year Spending Review.  At least until our forensic fiscal sleuths have had time to pore through the entrails overnight and serve up a fuller set of answers tomorrow.

At a time when government debt and borrowing has flooded to hundreds of billions - truly extraordinary levels in peacetime - to cope with the biggest calamity to face the UK for more than 300 years, local government has probably got just about enough to keep the show on the road.  And possibly extend the road for the sake of kicking the familiar battered can that is social care funding down it, for the foreseeable. 

The £3bn extra for local government on top of in-year support, the squeezing of an extra £300m in grant money and a bit of increased headroom through a 3% precept to increase council tax levels to help keep the wolf from the door of adult and children’s social care, and a further £254m (although £151m is new money, folks) for rough sleeping is probably a respectable but not great result for the sector.

The squeeze on public sector pay sets in train further agony for local government pay negotiations.  The chancellor has sought to protect the lowest paid public workers, as was the tendency of Osborne during the austerity years.  Again, this must be seen in context of the impact of furlough and unemployment on the private sector workforce this current year and as one measure in the Treasury’s control.   Whether this is politically or economically feasible in future years is another matter.

An increase in government day-to-day revenue expenditure of £540bn or 3.8% for real terms enthusiasts most probably means – when we factor in multi-year settlements agreed for health, defence and education – a flatline in spending once all has been smoothed out.

However, in terms of wider context, we should bear in mind the government has borrowed or printed £394bn this year, and according to public spending watchdogs the National Audit Office today, overpaid PPE to the sum of £10bn in five months between February and July.

Things look more promising for capital spending – although there remain concerns as to how places will get to bid to receive investment and who will have control over what gets spent where.

Unlike George Osborne’s austerity Spending Review of autumn 2010, there is to be no death slide for capital expenditure on long-term assets, instead a Keynesian merry-go-round involving a National Infrastructure Bank (NIB), news on the UK Shared Prosperity Fund to replace EU regional assistance programmes and at sub-regional level a £4bn ‘Levelling Up’ fund.

Provided it retains independence from political control, the NIB, which will be based in the north of England and active from next spring, can play a transformative role in permitting and delivering the kind of infrastructure improvements that a centralised state has failed to provide in recent years.

During the Brexit wars, ministers at DEXEU were advocating that following our departure there was a case for at least doubling regional aid on the basis the UK had been a net contributor.  We will have to see where that promise goes, but what we can discern is that there will be a £220m available to get it up and running before reaching £1.5bn on average per year when fully in flight.

There is a lot of talk about places and supplementing existing programme but as to how this is to be devolved, and to whom is not clear.  Similarly with specific programmes to tackle skills and in-work training, will these be delivered by central government contractors or through Work Local approaches?

There could be a lot more bidding from a new variety of pots, and local government quite possibly has a new set of protocols to learn and hoops to understand how to jump through to secure investment in place.

The £4bn Levelling Up fund offers some light relief.  Clearly it is designed to invest in local infrastructure that people value – better high streets and cultural assets – the ‘fun stuff’ that spurs regeneration ahead of the next political cycle.

There’s £600m promised of this Fund for England in 2021/22 for a  variety of local projects including road  schemes, bus lanes, station upgrades and community infrastructure and a chance to win up to £20m.  Please let’s hope lessons have been learned from the Stronger Towns Fund by the time this gets going. 

Jonathan Werran is chief executive, Localis

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