From potholes to swimming pools and, if you searched hard, business rates to local government funding, there was much in the Budget for council finance teams to ponder on. Richard Harbord pulls out the highlights.
Now we have an annual cycle of two Budgets, most commentators expect the main programmes for the public sector to be in the autumn Budget, while the wider concerns of the economy and macro-economics are covered in its spring counterpart.
Therefore, there should be no real disappointment that there were few major policy issues dealt with in this week’s Budget. Nevertheless, it does give a context and pointers to the future, and, in the deeper recesses of the 120-page Budget Report, there was quite a lot about local government.
I watched the televised Budget debate when one MP asserted that he was disappointed that there was nothing about business rates. In fact, there were some significant statements made about business rates and local government funding, but they were well hidden in Chapter Four of the document.
There were some significant statements made about business rates and local government funding, but they were well hidden.
Falling inflation
Inflation is a matter of concern to local government and the statement confirmed that the Office for Budget Responsibility (OBR) agrees that inflation overall will be 6.1% in 2023 and will fall to 2.9% by the year end. It was 10.7% when budgets were being set.
As the Institute for Fiscal Studies (IFS) says, this still means prices will be rising. Inflation will be at 0.9% by the end of 2024 and remain around that level until 2026 when it will move closer to 3%.
Interesting and important though this is, it is not always a good indicator for local government. There are currently reports of inflation in adult social care and children’s placements rising by 10-15% and, in some cases, 25%.
One area not mentioned in any way, shape or form was public sector pay increases. The expectation is that these will have to be contained within existing funding envelopes.
The statement did not repeat the tax increases already agreed but the OBR does say that standards of living will fall over the next two years by just under 6%, which may not be good news for council tax collection rates.
A major part of the statement was about bringing back inactive people to the jobs market to enable growth in the economy, with a figure of 490,000 people suggested. However, the OBR believes that all the measures taken together are unlikely to increase return by more than 110,000 and the Office for National Statistics said that the vast majority of the inactive are people taking early retirement who do not wish to return or those who are unwell.
The Budget actually contains expenditure plans for an extra £20bn. This makes it feel like a pre-election Budget, as most economists feel that growth in the economy is unlikely to be sufficient for any meaningful further increases in the autumn.
The Budget actually contains expenditure plans for an extra £20bn. This makes it feel like a pre-election Budget.
LGPS challenge
Before I touch on the matters of interest to local government , there is a strange and somewhat out-of-place reference to the Local Government Pension Scheme (LGPS) at the bottom of page 95. This says that the government is “challenging” the LGPS to move “further and faster” on consolidating assets.
A consultation will be coming to propose all listed assets are transferred to pools by March 2025 and to propose moving to a smaller number of pools in excess of £50bn to optimise benefits of scale.
This is moving back to former chancellor George Osborne’s original concept of one or two pools to cover England and Wales. It is a paragraph that is out of context with the other announcements around it.
Free childcare
Before looking at where the extra money is going, it is worth noting that there is no mention of adult social care, children’s services (except care leavers) or public health.
A major section of the Budget is around a change to childcare where the government believes it stands the best chance of increasing the workforce. There is to be an extension of free childcare to all children from nine months to three years. This will be rolled out from April 2024. Like many proposals there is a time lag. But £204m will be provided in 2023/24 and £288m in 2024/25 to fund increases in the hourly rate paid to providers of childcare.
There is also to be funding for wraparound support for children in primary schools. This will start in 2024/25 with £230m.
In all the Budget contains 170 different policy decisions. Of these, 40 are concerned with changes to taxation and 11 concern changes in Department for Work and Pensions regulations.
A Pothole Fund will provide £200m extra in 2023/24 – as this is intended to deal with four million potholes, I fear it may not go very far.
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Filling the funding holes
Local government finance teams should be aware of these:
- Swimming pool support – £63m to deal with immediate cost pressures
- Landfill tax to continue to increase in line with the Retail Price Index from April 2024
- Business rates retention – this scheme will be extended to more areas in the next Parliament
- Discounted rate for Housing Revenue Account borrowing from the Public Works Loan Board
- A Pothole Fund will provide £200m extra in 2023/24 – as this is intended to deal with four million potholes, I fear it may not go very far
- An extra £81m for each of the next two years to expand the current Care Leavers Programme
Many policy decisions will be in the new Parliament, and there is therefore some uncertainty about them.
Announcements you might have missed
Of the 170 policy decisions, 40 are concerned with changes to taxation and 11 concern changes in Department for Work and Pensions regulations.
There is a lot in the Budget of interest – some which was crowded out in the news coverage by the childcare and pension changes. Here are some worth highlighting:
- A third round of levelling up funding will proceed as planned later in 2023. This will be £1bn. Place-based regeneration will also be boosted by a £400m programme of Levelling Up Partnerships – targeting 20 areas in England “most in need of levelling up”.
- Returnerships was one of the buzzwords in the Budget. These will bring together existing skills programmes supported by £63m of additional funding to retrain over-50s wishing to return to the workplace.
- A summary of responses to the Business Rates Review was also published. This reconfirms the government’s commitment to reform. There also papers on business rates avoidance, transparency and disclosure in the Valuation Office Agency, and digitising business rates.
- The government is minded to withdraw all central support from Local Enterprise Partnerships. This will be after consultation and from April 2024. An updated policy position is promised by the summer.
- The statement also rules out any changes to local authority funding until the new Parliament. It suggests that the government “remains committed to bringing forward wider proposals to improve the local government finance landscape”.
It has to be noted that many policy decisions will be in the new Parliament, and there is therefore some uncertainty about them.
Richard Harbord is the former chief executive of Boston, Richmond and Hammersmith & Fulham councils.
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