Budget Preview: More freedoms or more constraints?
10 March, 2016

George Osborne’s recent warning about the impact of slower than forecast growth cast an ominous shadow over the Budget he will deliver on 16 March. Councils emerging from their own annual budget-setting rounds will have little patience for shifting spending goalposts only erected in November’s Spending Review. Instead, the Chancellor’s focus should be on creating the conditions and flexibilities for local government to drive sustainable growth and public service reform.

So what can local government expect next Wednesday?

Optimists might hope for signs of further progress on devolution deals. The Leeds city region is a notable large conurbation without a deal yet in place: whether its future lies as West Yorkshire or as part of a Greater Yorkshire remains to be seen. And there is yet to be a two-tier area signed up: the North Midlands Combined Authority discussions continue despite the withdrawal of some districts and the “Eastern Powerhouse” talks between Suffolk, Norfolk and Cambridgeshire are at formative stages.

In many cases, local leaders are working hard to forge consensus but particular political or territorial priorities have complicated the process. This is often not helped by the interventions of local MPs who have no direct delivery responsibility but do have strong views. The two tier shires are in the worst of all worlds, with Greg Clark signalling an interest in reorganisation in the apparent hope that councils will develop and agree their own plans. This has led to what Northamptonshire’s Paul Blantern rightly describes as ‘chaos’. A renewed signal of commitment to the principle of devolution from the Chancellor would be welcome, perhaps coupled with a stronger offer to devolve public service reform powers as well as new economic responsibilities.

We might also expect some further details about the move towards full Business Rates retention first outlined by George Osborne last October. For all areas addressing distributional questions is a priority: how is the right balance to be struck between fair resource distribution and incentives to stimulate growth?

Beyond this, there are many “known unknowns” local authorities need answers on so they can plan effectively for the future. Will the commitment that Business Rates retention must be fiscally neutral mean an offloading of random central government burdens on local authorities? Or will it be an opportunity to locally align strategically important functions to boost growth like employment support and enable more local public service innovation?

And how far will the policy involve constraints and prescriptions on local government’s ability to raise and invest revenue for local priorities, versus genuine local democratic control over the revenue stream? The Budget won’t contain immediate answers to these complex questions, but a signal on the consultation promised this year and how these issues will be approached would be a good start.

Finally, the Spending Review contained a promise of four year budget settlements for local authorities on the proviso they produce an efficiency plan. Longer term certainty would certainly support more effective planning across a range of issues as we demonstrated in our Smart Budgeting Report. But there has so far been little detail on what these efficiency plans would entail.

Can we expect a renewed push on these in the Budget? If so, the parameters of ‘efficiency’ will be important. Will this be pursued in a narrow sense relating councils alone rather than largely unreformed public services? Or will this be an opportunity for local authorities to create broader plans for innovation and integration with other local services? The latter would be an opportunity to secure more impact for public resource so often spent inefficiently through different departmental silos. Our Place-Based Health Commission report launched next week will set out a vision for a future system of health and wellbeing beyond institutions that works more effectively with people in the places.

As ever for local government, their challenge for the March Budget will be whether it will create new freedoms to deliver or simply establish new constraints that stifle. The looming threat of slowing growth means it is more important than ever for the Chancellor to take the opportunity to think big and creatively about local government’s role in bringing about sustainable growth and reform.