By Mark Smulian | 3 July 2014
There is little appetite among voters to pay higher taxes to support public services, and other options will be needed to pay for local government and the NHS in future, the CIPFA conference has heard.
Professor Julian le Grand, a member of the Commission on the Future of Health and Social Care in England, told the conference that problems of affordability in the NHS could be met only by increased productivity, increased private sector contributions – for example through service charges – or higher taxation.
He said the NHS was not suffering a crisis caused by an ageing population but rather one caused by increasing costs generally.
‘We are living longer but also living fitter so while the main cost of NHS care falls in the last six months of life, that period is being pushed back, so I’m not sure there is a crisis of affordability caused by ageing,’ he said.
Le Grand said that spending on health, care and pensions was crowding out other areas of public spending and ‘spending on things like housing has been squeezed which may itself have effects on health’.
Darra Singh, a partner at Ernst & Young who chairs CIPFA and the Local Government Association’s independent local government finance commission, noted that public spending had for many years run at 40% of gross domestic product before soaring to 48% in 2008 as the recession struck and now falling back to 43%.
‘It’s a question of the public appetite for taxation, which is 35% of GDP here but only 24% in the United States and there are concerns about international tax competiveness and collectability and polls suggests 18-30 year olds are less willing than their parents were to pay taxes to support welfare spending,’ he told delegates.
The commission was set up by CIPFA and the LGA to examine options for reform that could be delivered within the next parliament.
Singh said council tax had a number of benefits as a system of local financing as it was hard to avoid and easy to collect.
But it lacked buoyancy and he thought there was no chance that any government would allow a revaluation of the 1991 levels still used because the political furore that would result.
‘Its only 5% of UK taxation but draws a disproportionate amount of attention,’ he noted.
Business rates had similar strengths and weaknesses, with anecdotal evidence from some councils suggesting the concept of rates retention as a driver of economic growth did not work.
Singh suggested councils could do more by using their strong balance sheets to borrow, though said any government would be wary of the impact on overall public borrowing.
Grania Long, chief executive of the Chartered Institute of Housing and a member of the Lyons Housing Commission, sponsored by the Labour Party, told the conference that housing had gained increased political salience as a result of worries over house price increases.
These had moved, she said, from something seen as good news to a cause of concern over where people could afford to live.
She said that wven if all current policy instruments were used effectively there would still be a substantial gap in the 200,000 new homes needed each year.
Policymakers should stop looking at the housing markets as a single entity given the huge regional variations within it, Long said and caps on borrowing by local authorities to build homes should be removed.
While the coalition’s planning reforms had generally worked well she called for a more explicit duty to co-operate between council to plan for new homes and urged local polities to ‘win public buy-in’ for development.
