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Tony Travers: Local government spending and taxation are now unsustainable

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The long-running adult social care funding crisis has now been joined by a brewing business rates problem for the government.

Central departments have not been able to blame councils for either of these impending policy nightmares. So clear is Whitehall’s responsibility for both issues that blame has crashed directly on to ministerial desks.

Council budgets have been cut by about a third since 2009-10. Local authorities have partly protected adult care: spending in England has remained flat in cash terms at about £14.5bn between 2009-10 and 2016-17.

In the same period, the UK State pension bill has jumped from £83.5bn to about £112.5bn – an increase of just under £30bn. Put another way, the UK State pension budget has risen by a cash amount which is twice the total of expenditure on adult social care spending in England in any one year.

Yet the client group is broadly similar. Not all pensioners require social care provision, but the scale of those who do is likely to be closely related to the overall pension-age population. General election commitments to a ‘triple lock’ on pensions have absorbed billions which could have been used to transform care for older people. Of course, there are few votes in care for the vulnerable elderly.

The business rates rumpus poses less of a political risk for the government, but is still damaging. The Treasury (under George Osborne) conceded that “business rates represent a higher fixed cost for small businesses” and took 600,000 companies out of paying altogether. But the logic of the government’s position is that businesses which are not exempt but which are still relatively small will face a relatively “higher fixed cost” than even bigger ones.

Many smallish enterprises face huge rises. The government’s rationale for revaluing business rates is fine, except that it is not applied to domestic properties. Moreover, there is an element of retrospection in the imposition of a new, radically higher, rates bill after seven years without a revaluation. How could any business guess how its bill had changed until the new one was published by the Valuation office?

Local government spending and taxation are now unsustainable. Reform is needed.

Tony Travers, director, LSE London

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