Speculation on the government’s expenditure plans did not end last week with the announcement of the comprehensive spending review. What we now have is the average for the different departments and services with the extent of variation from the mean being determined over the next few weeks. In the meantime as the dust settles I thought I would look at some of the background issues that will be affecting local communities. The four year, 26% reduction will be a considerable challenge and so I have used the Spending Review 2010 document as my starting point to set out some of the key issues and questions.
Local Government funding changes are significant. Removal of ring-fenced budgeting including the inclusion of Supporting People in mainstream funding, options on pooling budgets, ending Growth Area Funding and replacing it with the Regional Growth fund with a direct linkage with development, will all create resulting changes in the shape of provision and the development of plans.
One of the biggest areas of change is in social housing, where there is little clarity as yet as to the precise nature of the future framework of funding. For example, it is unclear as to the intention and potential impact of the proposal to allow social landlords to charge new tenants somewhere between social and market rents. Is this to provide the cash back-up to foster investment and change the cash flow, or is it to enable the introduction of means tested rents dependent on ability to pay? Secondly there are investments proposed of £4.5bn in affordable housing, £2bn in the Decent Homes standard and further flexibilities in the overall Council Housing finance framework. There were significant concerns arising from the previous government’s proposals, and these, I fear, will remain.
Consultation on the new homes bonus will be critical, because it is not yet at all clear as to how this will work and if the government can actually afford it. Neither is it clear who will receive the bonus, in two tier areas will the planning authority that grants the permission receive the bonus, or will it be apportioned in the same proportions as the Council Tax? Will that assist in providing the much needed infrastructure that must accompany the new development?
Protection of Sure Start, Disabled Facilities Grants and Homelessness Grants should be welcomed as this will help to continue the pressure on early years development, and continue the opportunity for immediate interventions with disabled and homeless people.
Local government will need to engage carefully to ensure that the proposed changes to bus subsidies, together with the simplification of local transport grants, can have at worst a neutral local impact.
The freedom to borrow against tax revenues, and capital funding through the Regional Growth Fund will provide some assistance to local growth, but in some areas the growth that is needed is not necessarily dependent or linked to particular capital developments, rather it is dependent on the development of good local networks. Sticking with capital, the maintenance of prudential borrowing is welcomed, but the increase in the PWLB rate will provide some problems and adverse pressures on projects that are in the pipeline already.
There will need to be careful consultation and work on the ending of ringfencing and how best to introduce it in the coming budget cycle. The work to allocate and convert to the unringfenced early intervention grant could be particularly challenging. The implementation of the funding of the Council Tax freeze mitigation, and its relationship with the rest of the grant programme needs better definition. It is also unclear how the £200m capitalisation to assist with restructuring will be allocated.
Pooled budgets for older people and problem families will need work to ensure that cost-shunting is not replaced by some other form of defensiveness. As yet it is unclear how the housing aspects of this might be addressed.
The Council Tax benefit changes will reduce payments by 10% and localise it from 2013-14. Detail on this requires further dialogue between local authorities and the government. However, along with trailed measures to allow Local Authorities to potentially manage pressures on Council Tax , this could enable the sector to show how it can take on a fuller role in managing a whole system approach to benefits. Phasing in, over the next two parliaments, of a single universal credit will provide a significant challenge for local government. On the one hand it could be that the distribution of benefit is withdrawn from local government, with resulting shrinkage and reduction in critical mass. On the other hand, it could be that local government is asked to manage it as some form of franchise. This would be infinitely preferable, especially if there was withdrawal of ring fencing on the sums involved. However this would be a significant challenge and require local government to demonstrate the benefits of such a devolved arrangement.
The broad acceptance of the Hutton review on pensions, with a commitment to reduce pressure on tax payers and place more reliance on employee contributions should be welcomed and provide greater certainty for public servants in the long run.
Taking all this into account, the localism bill will be critical to the future effectiveness of councils and the productivity of their relationships with the rest of the public sector. In particular it will provide the foundation for the process, asset and pooling innovations which the government assumes will mitigate some of the impact of the budget reductions. Clarity on how it will relate to the CSR and the opportunities presented by a power of general competence will be needed if the most is to be made on this, potentially positive change.