The chancellor Philip Hammond attempted to put some optimism in his latest statement but, says Richard Harbord, there was little to lift the gloom for council finances.
This was Philip Hammond’s first spring statement, which the chancellor used to counter those who once compared him to Eeyore, the gloomy, slow-moving donkey character from the Winnie the Pooh stories.
Instead, Hammond described himself as Tigger-like — an allusion to the bouncy, ever-cheery Tiger from the same books — and told us how the economy continues to grow, create jobs and how it exceeded expectations in 2017.
However, those in local government will find little to be excited about in the statement. I suppose, at least, local government was mentioned, which is an improvement on some earlier statements.
Growth and debt
Not everyone is as optimistic as the chancellor on the growth figures. It is interesting that on the same day the OECD announced it’s own report on G20 growth which seemed to be at variance with forecasts from the Office of Budgetary Responsibility.
The chancellor is predicting growth of 1.5% in 2018 and 1.35% in 2019. The OECD forecast 1.3% for 2018, the lowest in the G20, and 1.1% in 2019, which is joint slowest growth with Japan.
The chancellor also told us that debt is falling. This is an intriguing statement because it all depends how it is calculated. It is true that on his figures debt as a proportion of GDP falls from 85.6% in 2017-18 to 77.9% in 2022-23, but in cash terms debt grows for the next three years. The chancellor says in his statement — lest euphoria creep in — that debt remains far too high at £65, 000 per household.
The Chancellor speaks of his commitment to our public services and much of the statement deals with announcements already made such as £9bn for the NHS and social care system. There is £31bn for infrastructure and extra investment in housing, but the statement offers little hope going forward.
Looking out to the future, the chancellor said that in the autumn he will set an overall path for public spending for 2020 and beyond. For local authorities, the difficulty is that 2020 is, at the moment, something of a cliff edge and making sensible forward plans is becoming well nigh impossible.
Hammond confirms a spending review in 2019 and states that, if all goes to plan, he will have the capacity to “enable further increases in public spending and investment in the years ahead”.
The government is supporting businesses by reducing business rates by £10bn, which doesn’t sound like good news for local government.
And there was an announcement on business rates revaluation. The autumn budget announced moving to three-yearly revaluations from 2022. This week’s statement brings that forward to 2021. It does not say how this will take place, or mention the resources necessary to do so, but I understand that in a paper shortly to be published self-assessment is not favoured.
Missing
Before the autumn budget this year there will be consultations on improving the quality of air, plastic littering, VAT collection for online sales, and taxing digital businesses in the global economy.
What is noticeably missing is any comment on the dire position local government finds itself in, nothing about a green paper on social care or help for children’s services. In an interview separate from his statement, the chancellor hinted at more money in the autumn for the NHS, but that just makes the position potentially worse for local government.
The LGA in it’s response said: “Councils in England face an overall funding gap which will exceed £5bn by 2020.” Sadly, fine words butter no parsnips.
The LGIU in its response said we don’t know how local government finance will work after 2020 and that urgent consultation is needed before the Autumn Budget on the future of funding, one in which all options are discussed.
There are concerns as well that the increase to 80% Rates Retention and the Fair Funding Review are going at a pedestrian pace. It is said that this Government has the lowest legislative output of almost any in memory due to the massive preoccupation with Brexit and it is all very worrying indeed. It is those working in local government finance who feel much more like Eeyore at the moment.
Richard Harbord is a former chief executive of Boston Borough Council.
