Budget 2016 report card: more homework for the chancellor

17 Mar 16

George Osborne’s Budget set a good direction on devolution and prevention through the sugar tax, but there are too many surprises and uncertainties for top marks.

The Budget turned out to be full of surprises with significant adjustments made since the Autumn Statement, which demonstrates that the government has not fully delivered the rhetoric of planning for the medium term.

CIPFA’s concern remains that growing liabilities in the Whole of Government Accounts such as occupational pensions, student loans, PFI and clinical negligence claims have grown, but are pushed under the carpet so future governments will have to fund the solutions. We argue too that state pensions should be on the balance sheet so that the high costs of the triple lock is transparent to our long term liabilities.

The UK’s gross domestic product growth is favourable with many peers but our productivity remains sluggish. This was brushed over and not addressed as the central issue. 

Users of public services facing further cuts – for example there are now 700,000 fewer elderly people receiving care than 2010 – will note the chancellor has made the conscious decision to decrease taxes and introduced further cuts in 2019/20 of £3.5bn. It is as yet unclear how the axe will fall which belies the lack of real medium term rigour.

We welcome that tax loopholes will be tightened at the margins of the overall system. The government should go further by having a systematic review of all personal and corporate tax allowances.

The reduction in business rates to small business is a positive step for growth but is likely to reduce the finances of local government. The Treasury says it will "compensate", which CIPFA will be keeping a close eye on as the suspicion is that this does not mean hard cash but some "spending power" sleight of hand.

The move to pilot business rates retention in London, Greater Manchester and Liverpool City Region also needs explanation. Does it mean the review of retention and form of equalisation is de facto done before the DCLG/sector led partnership approach has even had its terms of reference written?

Although the situation is confusing for local authorities, they will welcome in terms of public health the introduction of a sugar levy. Not only will this improve wellbeing, it will also be alleviate NHS finances in the long-term. So well done chancellor for this and the overall direction of devolution and infrastructure investment!

But what Whitehall giveth with one hand it centralises with another. It’s important we take stock of the major changes being imposed on the education system. The academisation of schools means the Department for Education will be accountable for all English schools. My prediction is that at some point in the next 20 years local government - perhaps through mayors - will have a strategic role in overseeing local education quality and tackling failing academies.

So in a school report vein, overall I'd say 6/10 – good direction on devolution and prevention through the sugar tax; but too many surprises and remaining uncertainties to get top marks. More homework is needed on our productivity gap and addressing our long term liabilities.

  • 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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