Seeking a ray of fiscal hope

By Heather Jameson | 14 July 2020

When chancellor Rishi Sunak stood up in Parliament to announce his summer statement last week, there was very little on the table for local government.

The previous week’s announcement of a further £500m funding for local government may have averted immediate financial catastrophe, but it is a long way from the stability needed.

It’s easy to write off the latest fiscal announcement as a loss to local government, but as the Institute for Fiscal Studies (IFS) director Paul Johnson said in the aftermath, it is an extraordinarily large rescue package.

‘In normal times, even in a normal recession, we would have been taken aback by the scale of measures announced outside of a budget. Up to £30bn of measures plus £33bn of public service spending not previously accounted for,’ Mr Johnson said. ‘But, of course, this is no normal recession. It’s the deepest in history.’

In May, the Bank of England said it expected growth to contract by -14%, although the Office for Budget Responsibility have not costed the latest announcements. Despite the £190bn in policy measures announced so far, GDP has not contracted this much since 1706.

In all of this, the financial rule book has been thrown out – a move that has been accepted by the fiscally prudent IFS. Mr Johnson said in his post-summer statement briefing: ‘Normally we’d also be asking what can be afforded. Today the question is better posed as what is needed and what can be delivered.’

The eye-catching ‘Eat out to help out’ plan – dubbed the meal deal – may have grabbed the headlines, but the chancellor’s statement was a clear attempt to protect jobs, particularly for the hospitality industry and for young people.

A business rate holiday and a VAT decrease to 5% for hospitality is likely to be more helpful than the show-stopping voucher scheme.

Cash for apprenticeships, the Kickstart scheme and boosting careers support are measures to avoid writing off a whole generation of young people – particularly those on Universal Credit.

It may be a welcome move, but as with much of the reaction to coronavirus, it focuses on solutions from the centre. Andy Burns, associate director at the Chartered Institute of Public Finance and Accountancy told The MJ: ‘It completely underplays councils’ roles in skills and apprenticeships. It [the summer statement] is silent on care and it is silent on climate change.’

He also believes the Government’s plan for a Job Retention Bonus – a £1,000 per person cash boost for each staff member brought back to work after being furloughed – was ‘quite generous’.

A total of nine million people – or a quarter of the UK workforce – have been protected by the furlough scheme, but relatively few were council workers after the Government made it clear it expected local authorities to redeploy staff where possible.

With May’s job figures 62% down on the previous year, keeping people employed is key, and the chancellor made it clear this is the second tranche of a three-pronged plan to protect employment, with the third expected in the autumn.

Then there were measures to boost spending, including the easing of stamp duty and the £2bn green homes grant.

The chancellor announced cash for renewing public sector infrastructure, with investment planned in schools, colleges, hospitals, prisons and courts, while mayoral combined authorities and Local Enterprise Partnerships will share £900m for local infrastructure projects.

While a £96m fund for town centres and high streets may look like a gift for local government, it is aimed at 101 projects – a thin scraping of cash to cover a chasm in local economies.

A Plan for Jobs, the Treasury document behind the announcement, reiterates yet again the money that has gone to local government – a total of £4.7bn including £3.7bn for social care, supporting the vulnerable and responding to the pandemic, as well as an additional £600m infection control cash for care homes and £221m for rough sleepers. And there is £4.1bn for the devolved administrations.

The problem is, the figures are dwarfed by the huge expenditure and plummeting income faced by councils.

President of the Society of County Treasurers, Gary Fielding, says the summer statement measures will start to ease some pressures on the local economy, but it doesn’t resolve the issues facing local government. ‘From a county perspective, the moves to boost the retail and hospitality sectors are welcome. As a Richmond MP, Rishi Sunak will know how important tourism and hospitality are to the local economy.

‘But in terms of broader financial support for local authorities, it doesn’t really offer any more than Robert Jenrick’s previous announcement. While the Government have made moves which help in the short term, we will be looking for an autumn statement to provide a bit more stability for the long term.’

There is perhaps a ray of hope in Mr Sunak’s document when it says: ‘HM Treasury will continue to work with departments to ensure public services receive the funding they need to respond to COVID-19 pressures.’

This is a partial kickstart at best

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