Jonathan Werran
Fiscal events are moments of great orchestration for the Treasury team who intend their spending leitmotifs and signature tax tunes to conduct the political mood-music.
This Autumn Statement is one in which the chancellor has put on his listening ears to take heed of his audience in local government’s plea for some short-term assistance. In this respect, the lifting of Local Housing Allowance to the 30th percentile of local market rents will provide some welcome immediate relief to those local authorities that risked being sunk financially by burgeoning costs of homelessness and temporary accommodation. Enjoy it while it lasts.
If the flurry of 110 Treasury measures in search of a compelling theme is the prelude to a May general election, a date with voting destiny, the decision to enact the National Insurance changes in January suggests to some pundits, there’s not a lot of hope for long-term decisions for growth.
Indeed, while it is to be hoped that the provisional local government finance settlement delivers a pre-Christmas package above current inflationary pressures, today’s statement was never going to fix an unsustainable and broken local government finance system.
For that we will have to wait for another day, and possibly the next Spending Review which will have to restore realism to cliff edge Departmental Expenditure Limit (DEL) cuts of £19bn to day-to-day spending in unprotected public service areas pencilled in under current plans. This would clearly be politically untenable, even in light of the rising costs of paying down historic borrowing.
It might be wishful thinking to expect a full rescue mission for the local state, for the root-and-branch reform, a fair settlement on the burden of social care responsibility and expenditure (especially in light of minimum wage hikes that will impact on the social care wage bill), an epochal shift in central-local relations, some measure of revenue uplift and degree of fiscal freedom and all that jazz. But one has to hope that the next Spending Review 2024 will help secure the medium safety of our local state as the prime anchor of place.
But as a secondary fiscal event, the Autumn Statement is not, notwithstanding a pleasing flurry of county devolution deals, going to shift the dial for driving the marked and swift uptick in regional productivity and local economic growth. It’s not being churlish to greet with positivity the various tiers of deals in different parts of the country, from Cornwall’s enhanced tier 2 deal to Hull and East Riding and Greater Lincolnshire’s full-strength level 3 and the exciting reveal of the higher level 4 that would give other combined authorities the trailblazing powers bequeathed to Greater Manchester and the West Midlands.
Again, it would be churlish to scorn what are some well-considered and well-intentioned measures in line with the Levelling Up charge of reducing regional economic inequality.
But there doesn’t seem to be anything here that would significantly shift the dial upon which the foundations of prosperity and improved public services can be built. As evidence for the prosecution, the call for restrain on long-term capital spending seems to echo Alistair Darling’s pre-election fiscal manoeuvring which his successor as chancellor George Osborne doubled down on into what looked on graphs like a death slide.
Housing growth represents the most direct route out of economic stagnation – a means of quickly addressing stark social need in delivery of affordable and emergency homes, tactile economic galvanisation that can radiate outwards in boosting wages and improving skills while improving the public realm.
Again, in a spirit of not being churlish, while the news that council planning departments can reclaim more money for fast-tracking major infrastructure schemes is to be welcomed. However, from a stubbornly localist perspective it remains perplexing that overstretched and under-resourced council planning departments should continually subsidise development at the expense of funding other vital local public services upon which residents depend.
A final note on where the rubber of local government finance hits the road of business prosperity. At the Labour party conference in Liverpool last month, Localis held an engaging panel debate on business rates reform and high street renewal. While there is good news for small retail and hospitality in the much lobbied for one-year extension, Uniform Business Rates has reached a record high level with the multiplier raised by 6.7 percent. This is fair enough for a chancellor seeking instantaneous results from his announcements. For big retail, this is seen as a broken promise from the 2019 manifesto and a brake on investment that would yield long-term place-based growth.
Fundamentally, like council tax, business rates remain a post-Thatcherite expedient from the early 1990s era of floorspace retail trapped in a vastly different 21st century commercial characterised by online shopping. Whether we have a fundamental reform of the system that mitigates against the big bang impact of a radical review which the shadow Treasury team are promising, we have to hope that serious attention is brought to this by the next chancellor. Otherwise, to take our cue from Tamala Motown, it will be the case of the same old tune or song, but with a different meaning.
