Friday, 24 April 2015

Osborne's Budget points to a darker future

While the media focused on the relatively marginal changes in tax on petrol, alcohol, tobacco and incomes, and on VAT and national insurance options in March's budget, George Osborne was busily trying to deflect any proper consideration of the scale or detail of the additional massive spending cuts for the next three years. 

As the Office for Budget Responsibility confirmed, this will mean “a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years” and “a sharp acceleration in the pace of implied real cuts to day-to-day spending on public services”.

There are big unexplained differences in the control totals in the Red Book and in the Budget announcements. Because of other commitments already made, Osborne’s spending cuts inevitably have to fall on defence, NHS, policing and local government.

Conservative MPs were already in full cry against any further defence cuts and the King’s Fund says NHS services – including A&E, waiting times and waiting lists for routine operations and for cancer – are deteriorating in a way not seen since the early 1990s. So, which spending lines do you think will bear the brunt?

Local government has already taken the largest cuts in spending. Local government services were 19% of total spending in 2010; today they are just 16% of a smaller cake. And, of course, those cuts haven’t been evenly distributed so that, for example, Mole Valley DC has had a £9 per head increase in spending power while Middlesbrough Council has lost £289 per head, and Tandridge DC has gained £11 while Tameside MBC has lost £185.

Just to rub salt in to the wounds, over the past six months, Eric Pickles and his ministers have distributed mini-largesse to marginal or threatened Conservative parliamentary seats. Taken together, Eric’s pork-barrel politics makes Ronald Reagan’s performance look distinctly amateurish.

In November 2014, the National Audit Office produced a report, Financial Sustainability of Local Authorities 2014, which raised a number of concerns both about the financial sustainability of local authorities and the Department for Communities & Local Government’s understanding of these challenges.

The NAO said the government had reduced its funding to local authorities by an estimated 28% in real terms between 2010-11 and 2014-15 and that further planned cuts would bring the total reduction to 37% by 2015-16, excluding the better care fund and public health grant.

Although there have been no financial failures in local authorities so far, local auditors say councils are showing signs of financial pressure and that they are increasingly concerned about local authorities’ capacity to make further savings, with 52% of single tier and county councils not being well-placed to deliver their medium-term financial plans. The NAO concluded the DCLG had a limited understanding of authorities’ financial sustainability and the impacts of funding cuts on services.

In February 2015, the communities and local government committee questioned the then permanent secretary and his deputy about the findings. I have to say that we were no more impressed by Sir Bob Kerslake’s swansong attempted justification of the scale of local government cuts than we were by his disappointment at the NAO’s conclusions.

In CLG Select Committee, I asked the relevant minister, Penny Mordaunt, to give a guarantee that the government’s review of business rates would not result in any cuts in local councils’ funding. Unsurprisingly, none came.

I then challenged Eric Pickles about whether the government, if re-elected, intended to carry on with year-on-year cuts to councils and whether, in that situation, it would be possible for all councils to remain financially viable and continue to deliver their statutory services. Answer came there none.

In our unanimous all-party view, financial sustainability is likely to be one of the most important issues facing local government over the next five years. Perhaps everyone will know that it’s really serious when the online bookmakers start taking bets on which council will go under first!
Clive Betts, Labour candidate for Sheffield South East. He was chair of the Commons communities and local government committee in the last parliament

This article first appeared in the Local Government Chronicle on 23 April 2015