The devil is in the detail

By Martin Reeves | 27 September 2022

So much for a mini-Budget. There were plenty of maxi changes to taxes but it changed very little for local government, at least directly.

Let’s start with what was announced. The creation of up to 38 new investment zones is potentially positive for the places selected, especially for those areas most in need of levelling up, if they can help accelerate commercial growth and large-scale housing delivery.

The Government’s plans include a promise to provide councils with 100% of the business rates growth in designated sites above an agreed baseline for 25 years, and providing mayoral combined authorities – but seemingly not individual council areas – with a single local growth settlement in the next Spending Review period.

However, much of the detail of how all of this will work remains missing. Providing time-limited tax reliefs, site-specific planning freedoms, and streamlined funding pots may help in time to boost local GDP in the limited number of assigned areas. It remains unclear, however, what this means for the (majority of) villages, towns, and cities that miss out, let alone whether any economic uplift in the 38 lucky localities is enough to shift the dial significantly nationally. It is also imperative that investment is made in our communities, upskilling, re-skilling and connecting those who are furthest from the job market into these new opportunities. This must be equally prioritised alongside capital infrastructure funding, otherwise structural inequalities will continue to widen and deepen.

The chancellor announced the Government will bring forward a new Planning and Infrastructure Bill to enable planning reforms, which will ‘reduce bureaucracy in the consultation process’ as well as reforming environmental assessments and regulations. Again, we will have to wait to see the detail before fully understanding what this will mean for our places, and the previously planned Levelling Up and Regeneration Bill.

Last week’s announcement was triggered by the energy crisis and buried in the Government’s Plan for Growth are proposals to ‘imminently open applications’ to a £2.1bn fund, spread over two years, for councils to apply for funds to invest in energy efficiency and renewable heating. But, as the fund is also open to housing associations, schools, and hospitals, it remains to be seen how much of that money finds its way to local government.

And, while the previously announced cap on energy price increases will go some way to easing the financial pressure on council budgets, the relief, as things stand, is limited to six months and our bills are still far higher than they were a year ago, meaning tough decisions may still have to be made in-year and/or next year about the provision of services.

The Government’s moves to limit energy price rises is helpful, but the soaring cost of living is driven by other factors too. With the rate of inflation at about 10%, councils’ costs are spiralling with the Institute for Government predicting local authorities are on course to be up to £2bn out of pocket in this financial year alone. There was nothing in the chancellor’s announcement that sought to deal with that. While a combination of the energy price cap and tax cuts will go some way to easing the financial pressure on our residents, many of the most vulnerable in society will still suffer hugely in the coming months, increasing inequalities in all of our communities.

At a time when people will be worrying about turning the lights on, councils, as beacons of hope in times of crisis, will continue to be increasingly called upon in their time of need, in turn heaping more pressure on the sector’s challenged workforces and ailing finances.

While confirmation that the additional funding for the NHS and social care services will be maintained at the same level is welcome, along with the announcement of £500m to help people out of hospitals and into social care support this winter, the fact remains the financial package on offer falls far short of putting the social care sector on a solid financial footing.

Scrapping the health and social care levy also raises longer-term questions about how this Government plans to sustainably fund both sectors in the future.

Will it spark the growth the Prime Minister and chancellor believe it will? If so, how long will that surge last for – is it sustainable or a sugar rush boom followed by a slump? And, will any GDP increase generate enough additional tax receipts to cover the costs of all the measures announced last week?

Much of what has been proposed is to be paid for through many billions of pounds worth of additional borrowing. That, combined with the costs associated with the Covid pandemic response – estimated to be between £300bn and £400bn – means the medium-to-longer-term outlook for public service expenditure could be bleak and result in a return to austerity after the next General Eection. After all, as councils only know too well, you have got to balance the books somehow.

Martin Reeves is Solace spokesperson for local government finance, and chief executive of Coventry City Council


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