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News release

Budget 2020 and local government

Paul Dossett, Head of Local Government, Grant Thornton UK LLP, commented:

“Ahead of the Budget I, along with many in the sector, called on the Chancellor to provide longer term certainty on local government funding. But this did not happen. The sector will need to wait for the Autumn’s Spending Review for clarity but it was positive to hear that the Spending Review this year will be a three-year settlement.

“It was also positive to see the announcement of a new devolution deal, for West Yorkshire, with a Mayoral election to be held in May 20201, and London style additional funding settlements with the seven other metro mayors totaling £4.2bn.

“Despite the sector facing extreme funding pressures, local government did not feature highly in today’s announcement. Some additional ring-fenced funding was announced, including a £500m hardship fund to support the coronavirus impact on problem debt, a £2.5bn pot hole fund, and £242m additional city growth deals. There will also be a cut to interest rates for local authorities on lending for social housing by one percent – which should encourage councils to build and boost social housing supply across the country.

“The Chancellor also announced £5bn of funding to manage the impact of the coronavirus pressures on the NHS, support local authorities to manage social care pressures and support vulnerable people, and help manage pressures on other public services. This fund will be reviewed “as the situation develops”, although the Chancellor did not mention how councils could specifically benefit from this additional funding.

“The ongoing demand-led pressures facing local government are not going to go away and, in many respects, the Budget has raised more questions than answers - how will the UK Shared Prosperity Fund be allocated? How will children’s social care cost and demand pressures be resolved?

“The business rates relief as part of the government’s response to the coronavirus will cost £1bn over the next 12 months, and it was encouraging to see that the government will fully compensate councils for these measures.

“It was perhaps a throwaway remark made by the Chancellor – that he will be consulting on the future of the Public Works Loans Board (PWLB) – but this could have a significant impact on some councils, in particular following the increase to the PWLB borrowing rate announced last year, as the government continues to seek further constraints on councils borrowing for commercial property investments.”