Budget 2016

Budget 2016: Expert comment on Local Government

The Chancellor confirmed in his budget today that trade and growth in the global economy was materially weaker than in previous OBR forecasts. This entails obvious challenges for local government in growing the tax base to balance budgets. 

The Chancellor has promised a further £1.8bn through Growth Deals for regional spending by Local Enterprise Partnerships and a further £2bn through the Home Building Fund to unlock large housing sites. This is welcome, given the scale of the housing challenge, but arguably reinforces ring-fences rather than promoting autonomy for place-based leaders. Measures to reform planning and accelerate house building are welcome, but it is not yet clear whether they will go far or fast enough to cool down dangerous overheating in parts of the country. 

The Greater London Authority has been promised 100% retention of its business rates from 1 April 2017, three years ahead of the full roll-out of the business rate reforms. We support this move, but believe it should be piloted in other areas in parallel, such as the recently created Combined Authorities. However, the Chancellor has also promised to cut the burden on ratepayers in England by £6.7bn over the next five years by cutting business rates for all properties, ensuring the smallest businesses pay no rates at all and modernising the tax system. There is a risk that local government may be receiving “all of nothing” rather than a “share of something”. It is not clear at this stage what new responsibilities come with this devolution of business rates, and there could be a risk that the cost of these new responsibilities will not be offset by increased business rate income. 

The announcement of three further devolution deals out of the 34 submissions in September 2015 does not set a blistering pace. The Government must act faster and work more collaboratively with other localities to confirm other devolution deals.  An imposed governance model of a metro mayor has been an inhibitor for other localities. It will be interesting to see if the Government is able to retain momentum on future devolution deals in the run up to the EU referendum in June. 

City regions with pre-existing devolution deals have been given another bite of the cherry, with additional criminal justice powers for Greater Manchester, further announcements on transport and business rate retention for the Liverpool City Region, as well as new investment in transport and infrastructure across the Pennines. 

Finally, some aspects of the budget stood out as running counter to the devolution message. The Chancellor made a point by saying he inherited a system where local government received 80% of its funding from ring fenced grants but by the end of this parliament they will be 100% funded from locally raised income spent locally. Yet buried in the budget detail is a £50M Pothole Action Fund for England in 2016-17 to enable local authorities to fill nearly a million potholes. More significantly, the Chancellor's announcement to move all schools to become academies is a clear centralisation approach that does not chime with the overall devolution message.