Thursday, 18 October 2018

The economy, stupid.

In 1992, in Bill Clinton’s Little Rock, Arkansas, presidential campaign HQ, strategist James Carville hung a sign that read
  • Change vs more of the same
  • The economy, stupid
  • Don’t forget health care
Shoot forward to today.
We’re certainly in for change and not more of the same.
However, Bill Clinton had a clear idea about the change he wanted to bring about in the USA, whereas Theresa May appears not to have the faintest idea where her Brexit will take the UK. We appear to be on an anarchic roller-coaster of uncertainty, which inevitably means that many companies are now delaying investment with the consequent impact on long-term sustainability, jobs and the national economy.
And, what about the economy, stupid?
Well, let’s put to one side the UK economy and focus on the English local government economy.
Earlier this year, the National Audit Office confirmed that government funding for council services in England had fallen by 49% since 2010. This week’s Cambridge University report, using IFS-compiled data, confirmed that the impact had been that the average council’s spending in England had been cut by 24% since 2010.
This compared to a 12% cut in Wales and 11.5% in Scotland. It appears that the Scottish Parliament and the Welsh Assembly have been able to mitigate the harshest cuts. Don’t be surprised if there is a renewed call to revisit the Barnett Formula. “Mrs Crankie’s free social care for Scotland being funded by Mrs May cutting all social care for many in England” might provide the basis for a populist campaign.
Further, the report confirms that the deepest cuts have been forced on the most deprived areas. Thirty councils have had cuts exceeding 30% (seven exceeding 40%), with only one (LB Westminster, whose net car-parking income alone exceeds the government grant of most authorities) not in the areas with the highest levels of poverty and the least ability to secure income through charges and regeneration.
Meanwhile eight authorities, all relatively wealthy, have had cuts of less than 10%. When the leaders of some of those authorities have been loudly complaining about the financial challenges facing their authorities, it does make you wonder how they would have coped with the scale of the cuts in Salford or South Tyneside. Unsurprisingly, Eric Pickles described this distribution as ‘fair’!
The government has already announced another £1.3bn of cuts in local government revenue resources. So, what are we to make of Mrs May’s loud Party Conference claim that ‘austerity has ended’, whilst whispering ‘from the next spending review’? As this is the third time she has announced it - and we have absolutely no idea what any Brexit deal or no-deal might mean – the answer is ‘probably not much’.
And how does this all square with Chief Secretary to the Treasury Liz Truss’s claim at the same Conference that
“We are not making cuts to local authorities. What we have done is given them more revenue raising power.”
When challenged about the veracity of this absurd claim, the Treasury said:
“The 2018/19 Local Government Finance Settlement confirmed the third of a four-year settlement for local councils over the Spending Review 2015 period. This settlement ensures a 2.1 per cent increase in cash terms in local government Core Spending Power between 2015/16 and 2019/20 – £44.7 billion in 2015/16 and £45.6 billion in 2019/20.”
As all the reputable fact-checkers have confirmed, a 2.1% increase in cash terms over that period is inevitably a significant real-terms cut.
All this is taking place in a context where the government is committed to phase out central grants, leaving council services to be funded through local business rates, council taxes and fees and charges which will inevitably increase inequality, especially between London and the south-east and the rest of England. Meanwhile, the government’s claimed devolution mitigation model seems to be hitting the buffers. The implications of further service cuts and a stuttering economy are serious for many communities.
One supreme irony about the impact of the global economic collapse and the UK government’s austerity measures is that, whilst the government and private companies have been able to benefit from low interest rates, local government has effectively been estopped from doing the same in respect of its long-term high interest debt, particularly from the 1980s and 1990s. To deter councils from, at its simplest, swapping high-interest debt for low-interest alternatives, the government forced the PWLB to impose financial penalties which made such swaps uneconomic.
It is now estimated that councils are being forced to pay – even after the payment of penalties - close to an additional £1bn in debt interest this year alone. If the government wanted to ease the financial challenges for councils, the Chancellor could do something about this in his forthcoming budget.
Without action, we can continue to expect to see more Sure Start Centres and libraries closing, road and park maintenance declining, and a falling capacity in trading standards and food inspections.
And don’t forget health-care…
The latest NHS statistics - with rising waiting-lists and waiting-times for investigations and treatment, falling numbers of GPs and increased vacancies – confirm that the NHS is not safe in this government’s hands.
How many more times is it possible to announce that our mental health services are unacceptable and that urgent action is being taken to address this?
Councils will soon be financially unable to over-spend on their budgets to support children’s services.
And the £240m for adult social care is just another hasty sticking plaster when we need short-term certainty as well as a long-term, widely-supported solution.