Roundtable: The Budget
LGE's panel of experts examine the final Budget before the general election.
This Budget fired the starting gun on what will be the most difficult to predict general election in a generation.
Some pre-election coverage suggested the Chancellor may announce modifications to the depth of cuts planned during the next parliament. However, he stuck to the additional £30bn savings previously announced. Of this, £13bn will be met by Government departments but it remains unclear how much of this will be borne by local government.
However, the key message on public finances is that a surplus is forecast during 2019-20 and that public spending will then grow in line with growth in the economy. This offers a glimmer of light at the end of the tunnel for public services.
We welcome the planned business rates review and hope that it will be radical, considering how business rates can better reflect the modern economy - not necessarily based on property values - as well as incentivising cities and local authorities to support and not hinder business growth. This should include full devolution to local authorities to provide them with the freedom to generate revenue to invest in local services and assets, enabling local decision making and accountability, but with appropriate safeguards to support more deprived localities and to avoid unnecessary tax competition.
More broadly, many in the sector will be disappointed that the LGA's hoped for ring-fencing of social care budgets to protect them from further cuts did not feature in the Chancellor's statement, although commitments are given in the Budget Book to explore further integration of health and social care budgets at a local level, going beyond the Better Care Fund.
A final word of caution: Given the unpredictability of the outcome of May's general election, it is likely that there will be an emergency Budget following the formation of the next government - particularly if there is a new chancellor in place - which could see these Budget plans amended or overturned.
The Budget documents demonstrated the huge cuts that local authorities have dealt with in this parliament and how much more they still have to undergo. In 2015-16 alone, Government support for councils will fall by 23 per cent - on top of the 50 per cent cuts they have already endured over the past five years.
Local services are already stretched thin and while many councils have dealt well under the pressures they have faced, there are increasing instances of them struggling to cope under the strain of their finances. The impacts of these cuts are now feeding through into pressures for other areas of the public sector such as the NHS and the criminal justice system.
With this in mind, those who are serious about the future of local councils and the services they provide must ask if the continued trajectory of funding cuts are sustainable or desirable.
Despite the Office of Budget Responsibility (OBR) upgrading its projection for UK growth to 2.5 per cent, local authorities across the country are still reeling from the effects of substantial budget cuts.
It is encouraging that the Chancellor announced that the squeeze on public spending is due to end a year earlier and that public spending is set to increase in 2019-20 in line with economic growth. However, the £13bn of cuts to Government departments are likely to put further pressure on local authority budgets.
As this dark cloud looms over local government, councils must therefore be prepared for the impact that these changes will have. As they reduce services, they could become increasingly exposed to new operational and financial risks. This will be felt even on core services such as social care if councils are forced to further tighten their belts.
With the economy improving, local authorities are also facing new challenges in the management of public expectations. While the public has so far noticed little change in the delivery of service, it is inevitable that public expectations of local services will increase as the economy improves elsewhere. This is set to become a growing challenge for local authorities over the coming years, and council leaders must ensure that public trust in the sector remains intact.
Council chiefs should, however, feel reassured that Britons are yet to notice any fall in standards in the delivery of council services. This is a huge testament to the work that our councils have carried out over the last five years. As our research has shown, few have actually noticed any difference to the standard of service they receive on a day-to-day basis. While 97 per cent of councils have introduced major operational changes in response to budget pressures, almost two-thirds of the public (64 per cent) feel that core services such as refuse collection, street cleaning, education and social care have remained unchanged.
Of course, and as the funding cuts continue to bite, the challenge now is to retain this public satisfaction.
This was a Budget that sets out a blueprint for a new model of government. Significant cuts for central government and no new money for local government on the one hand but greater fiscal autonomy for local authorities and the regions on the other.
In reality, the business rate retention for Manchester and Cambridge, if extrapolated nationally, will move toward the goal of financially self-sustaining local authorities. This will drive local and sub-regional leaders to focus ever more on balanced growth and economic master planning.
The focus on a Northern Powerhouse, South Wales and the Midlands demonstrates further commitment to spreading the growth and should be useful in bolstering investor and developer confidence to enable growth and regeneration in these areas.
Overall, the Chancellor's last budget of this parliament sets a framework for growth - it will be up to local leadership to capitalise on it.
The Budget revealed that, while the deficit is decreasing and Britain may be "walking tall again", the austerity years are not yet behind us. With £30bn of savings still to be made by 2017, there will be no respite from the pressures on local government and the welfare system. In particular, local leaders will continue to wrestle with the fiscal reality of national spending decisions.
The Budget revealed extended digital ambition and demand for significant savings through efficiency and reform, while keeping satisfaction standards high. We applaud the call for closer collaboration between local government, the Government Digital Service and partners to deliver more customer-focused, digitally enabled and efficient local services. From our recent report, The Changing Landscape for Local Government, it is evident that new technology implementations are driving efficiency savings and 43 per cent of council leaders and chief executives believe that using technology to encourage citizens to self-serve will be a key priority as their organisations adapt to a new model of working by 2025.
With new and continued commitment to initiatives, including the NHS's Five-Year Forward View and an in-depth efficiency inspection of every police force, there is no doubt that the way organisations operate will need to change if the overall message from the Budget that we should see our country go from austerity to prosperity is to be realised.
This Budget suggests that the austerity years may be shorter than expected, with an improved long-term outlook for the public finances - but the years ahead will also see sharper and deeper austerity than we have seen in this parliament.
The challenge for public services is not so much when austerity ends; it's how we get there.
The forecasts suggest a period of reform across the public sector that will be more concentrated than anticipated, but no less profound.
The next parliament will see deeper cuts to public services than in the last and ministers in the next Government will need to be braced to make some intensely difficult decisions. They may well find the public surprised by continued austerity when they will be seeing the benefits of an improving economy.