Twas the week before Spending Review

By Peter Stuart | 17 November 2015
  • Peter Stuart

It’s the week before the Spending Review and like children on Christmas Eve we are all excitedly wondering what is in store for us…

Does a 30% cut in Department for Communities and Local Government spending translate into a 30% reduction in grant over four years? And if it does, won’t that leave 70% of the Revenue Support Grant (RSG) still in existence by the end of the decade?

Will the New Homes Bonus (NHB) decrease in the same proportion or will it disappear altogether? Will there be freeze grant monies available? Will the Department for Work and Pensions reduce administration grant as a way to mitigate the tax credit savings not now to be achieved?

And when will the business rate retention scheme move to being 100% retained?

As the song goes, ‘there are more questions than answers’, but getting answers to some of these is fundamental to our ability to set a sustainable and coherent financial plan. Without knowing the parameters within which we are to operate in the next few years, the natural, rational reaction is to be prudent.

And that’s a problem. Prudence is one of those virtues that at one end of the prudent/imprudent continuum could so easily be a vice. Uber-prudence can so often mean doing nothing, risking nothing and planning to do nothing. It can be a road to a dead end, it can mean amassing reserves to cover eventualities until the need for prudence has passed, but with confidence eroded that time might never come. Uber-prudence is actually quite a nice, safe, place to be, as fewer decisions need making and you can never be wrong. Anyone recognise themselves?

This Spending Review might be counterproductive. We may see more council tax rises as members move to protect their income streams and we may see the level of earmarked reserves increase as buffers for uncertain times.

For authorities that have mainstreamed it, Christmas parties are going to be very subdued affairs this year if they have to find both RSG and NHB savings.

Peter Stuart is president of the Society of District Council Treasurers

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Finance Spending Review