As expected, the Spring Budget hasn’t delivered additional funding for local government. The challenges facing the sector are well-rehearsed. While the additional £600m of funding provided in the 2024/25 settlement will be welcome, the sector will feel disappointed that the Spring Budget missed an opportunity to provide meaningful long-term funding solutions.
Given the current fiscal environment, there are several challenges for Government in providing additional funding for local government, and the lack of decisions made in the Budget are likely to lead to more financial distress. In the absence of additional funding being made available, the Chancellor announced a Productivity Plan for the sector to mitigate medium-term funding challenges by improving productivity. We believe that Government could help to ease at least some of the financial pressures facing the sector by developing a Productivity Plan specifically for local government. A future Government needs to focus on reorganisation, fiscal reforms, unlocking the potential of digital, social care reform, and addressing governance issues tackling fundamental, deep-rooted structural issues.
To achieve this our recommended five-point plan for local government after the General Election would be:
To address the significant capacity issues within the sector, where areas are not covered by existing devolution deals, Government should work with local government to explore opportunities for reorganisation aiming to remove duplication to enhance capacity.
Abolish the Council Tax referendum limit to allow greater flexibility and freedoms for local government to raise more revenues locally. Government should look to provide the framework for local authorities to generate other local revenues, allowing the innovation that can be delivered by an understanding of local geographies.
Fiscal devolution – Along the lines of the trailblazer devolution deals, further transfer of funding to local government which would be better placed to make decisions about local priorities, particularly around transport and skills.
As part of the fiscal reforms Government should deliver on multi-year settlements that would allow for a more robust planning process.
Competing priorities and increasingly acute pressure in areas such as homelessness and social care, combined with reductions in funding from Government, mean local authorities haven't been able to unlock the benefits of modern technology.
We believe that councils could unlock more than £2 billion of benefits by implementing different technologies across the sector. However, this would require a centrally-run programme backed in a similar way to the NHS Productivity Plan that was announced today. This would provide capabilities, capacity, and cash for councils to realise these benefits locally.
This remains a key priority for the sector. Unlocking better integration between health and social care to streamline service delivery, remove duplication, and improve patient outcomes, alongside solutions to workforce challenges and long-term funding sustainability, remains paramount.
Establishing the role of the Office for Local Government (Oflog) as an independent body with a wider remit in relation to appropriate use of resources within the sector.
While there are no short-term solutions to the issues with the sector; starting to address some of these fundamental issues as a matter of urgency could mean there is light at the end of the tunnel for the public sector.
The Budget announced the next steps in the Public Sector Productivity programme. The NHS productivity plan is backed by an additional £3.4 billion of funding. The government is announcing an additional protected £2.5 billion in day-to-day funding to support the sector.
Along with the general theme across the sector, further pushes on productivity and efficiency and maximising the use of resources was a strong message. Alongside maximising value, the use of data and re-emphasising the long-standing commitment to supporting the New Hospital Programme.
The release of annual NHS planning guidance has been delayed due to ongoing discussions on funding and efficiency targets. Continued inflationary pressures and the full impact of the pay awards mean the NHS could be looking at real-time funding reductions rather than investment.
Short-term top-up funding to bail out hospitals has been a common feature over the last few years but this doesn’t help the NHS plan and manage its delivery effectively. The NHS should be given clearer commitments so it can plan, develop and manage over a longer period. Providing stable funding, opportunities to realise recurrent efficiency, and maximising infrastructure will deliver operational and financial sustainability.
The complexity, challenges, and pressures within the NHS cannot be addressed by short-term fixes and planning horizons.
As expected, transport and infrastructure did not feature heavily in the Spring Budget, given a number of announcements had been made previously. This includes the recently announced £4.7 billion reallocated HS2 funding to transform transport across the North and Midlands. However, there were announcements of further devolution including the trailblazer deal for the North East.
Given the monies provided to enable devolution, local authorities will need to ensure that allocated spend goes on transport projects that deliver the greatest value for the travelling public and the taxpayer. Likewise, Central Government will need to ensure that value for money is achieved from such funding.
Recent funding for local authorities does help put decisions closer to those best placed to make them. This increased devolved decision-making should enable cities and towns to consider a more ‘place-based’ approach to transport where modes work better together. However, to deliver this there will need to be a shift in approach.
To find additional fiscal headroom for individual tax cuts the Chancellor extended existing taxes on the energy sector. This focused on extending the sunset on the Energy Profits Levy to 2029 – providing an additional year of funding from this tax.
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Local government reorganisation
Fiscal devolution
Unlocking the potential of digital
Social Care reform
Addressing governance issues within the sector
