The 2015 Spending Review: another roll of the dice

26 Nov 15

The chancellor is enjoying a lucky run in having significantly better than expected public finances to rely on in planning the next five years.

Being able to borrow less and pay less interest is enormously helpful when you have some difficult issues to duck.

Whether the improvement in public finances is actually as good as it sounds depends on the extent to which you believe in the Office for Budget Responsibility’s fortuitously timed forecasts and the small “correction” of their VAT model, which coughs up an extra £11.5 billion by 2020. That is a conveniently similar amount to the reduction in tax credits George Osborne has had to back away from, so who’s arguing?

We must celebrate the overall protection of police force budgets and the real-terms protection for overall policing. In this time of emerging threats and new forms of crime we must fund public safety adequately. CIPFA frequently makes the case for investment in transformation and again the commitment to funding transitional arrangements here is welcome. So too is the increased flexibility for police and crime commissioners to raise local precepts. Among more evidence of localisation this is another step, albeit a small one, in the right direction.

In terms of other devolutionary dynamics, we have confirmation of the localisation of business rates with new powers to raise them for infrastructure development, and the granting of the income tax levy to Wales without a referendum. In these, as in the creation of a social care precept, we are seeing an increasing shift of uncomfortable but unavoidable tax burdens to the local level. While this is no bad thing – quite the contrary – there is a sneaking sense the chancellor is motivated by a desire to avoid tough choices himself, instead passing unpopular taxes down the line. He can’t possibly think Wales will do anything other than raise income tax.

In terms of commitments to funding health – on the surface extra funding, especially as it is front loaded – is very good news. However, when we analyse what it is for and what the current demands are, we cannot but conclude that the £6bn of extra investment is not all it appears to be.

Firstly, £2bn is already factored into this year’s resourcing and we know that budget is set to be overspent. Other calls on the remaining £4bn include: rectifying this year’s overspend; £.6bn in mental health commitments; funding for seven-day working, which was a commitment not factored into the Five-Year Forward View and estimated to be some £3bn a year in due course; and finally the likely shortfall in the Five-Year Forward View’s productivity targets, the scale of which has never been achieved before.

Similarly, there is a good deal of scepticism about whether the social care tax, even at 2%, will cover the rising demand and increasing costs of the sector. The recent news about the closure of “unviable” care homes in Northern Ireland gives us timely pause for thought.

So behind the headlines and the spin there was little beyond protection for the police to be cheery about.

And as exemplified by the requirement for nurses to fund their own education to enable more to be trained (a move which could well crash and burn), there are a number of big gambles underpinning the chancellor’s numbers today. The low hanging fruit of efficiency has already been picked, further savings will be much harder to reach. Economic forecasts look good now, but we are living in as unstable a world as we ever have been, and it wouldn’t take much to tip the scales the wrong way. 

Let’s hope the gambles pay off.

Download CIPFA's analysis of the Autumn Statement here

  • Rob Whiteman
    Rob Whiteman

    Chief executive of CIPFA since 2013, after leading the UK Border Agency and the Improvement & Development Agency. Previously, he was CEO at Barking and Dagenham council.

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