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Stockholm Syndrome? Why sector should acknowledge positives from Hammond

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The austerity imposed by the Conservative-led governments of this decade has decimated local services so it is difficult to praise Philip Hammond’s belated easing of the worsening scale of the pain today.

This afternoon’s Budget suggested the chancellor has finally been convinced of the fact that local government’s crisis is reaching the point where councils are on the cusp of falling over, causing both the Treasury and his party real trouble as they seek to deal with the voter-maddening fallout.

Mr Hammond offered something for social care, children’s services and highways. It is hard to remember the last time local government services won such meaty extra central funds in the Budget.

This, of course, has to be counterbalanced with the previously-announced cuts in revenue support grant for 2019-20, and all the other grant cuts councils have endured this decade.

Mr Hammond promised £640m of extra funds for social care (although the small print shows some of that could actually go to children’s services). As Glen Garrod, president of the Association of Directors of Adult Social Services, noted, the extra money falls “far short of the £2.35bn that Adass identified would be needed for social care to stand still in 2019-20”.

It is hard to believe this Budget really amounts to the end of austerity, as promised by Theresa May. The smart money is on it being a mere modest levelling off of a previously plummeting line on a graph. We await further analysis – including a briefing from the Institute for Fiscal Studies tomorrow – to confirm this.

IFS director Paul Johnson today tweeted surprise that the government did not offer more clues as to likely departmental spending levels for next year’s comprehensive spending review, adding: “The assumptions on spending suggest day to day public service spending outside of health roughly flat real going forward.” Well, flat would be better than plummeting.

As Mr Johnson’s concerns indicate, the real action will take place next year in the CSR which will determine departmental spending for at least the subsequent three financial years.

The best councils could hope for from Mr Hammond today was that this would be a Budget that passed the test set by District Councils’ Network chair John Fuller (Con) in that it should ensure councils “get to the start line” of the CSR and not collapse in advance. The jury is out on whether Mr Hammond has passed this test.

And it is through the prism of the spending review that our reaction to this Budget should be set.

All of us in local government know that Mr Hammond offered too little. Social care will continue to go backwards; there is insufficient money for children’s services. It is also frankly insulting for a chancellor to promise to equip councils to tackle potholes with £420m when the 49% reduction in central funding has diminished councils’ ability to do this. And ex-minister Lord O’Neill was bang on the money when he said the failure (again) to fund Northern Powerhouse rail, questioned the government’s commitment to the whole north of England. “This government needs to become much more committed to the Northern Powerhouse or stop talking about it,” he said.

The government has been pretty deaf to councils’ plight for the whole decade and unreservedly slamming everything Mr Hammond presented today is not going to change this.

However, the bigger battle is next year.

Everything local government does right now should be targeted towards making a success of its lobbying for a successful comprehensive spending review. Mr Hammond will need to see that he gets a return on his investment from any extra money for councils. This return is not just in the financial sense, it is in the political sense too.

LGC has it on good authority that the chancellor has previously felt let down by councils whenever he has offered them extra resources. From his perspective, there has still been the carping from Tory councillors (and their Labour counterparts, of course) about local government facing ruin. From the perspective of Mr Hammond (and the Treasury, a long-term sceptic about the value of councils) local government has cried wolf – only Northamptonshire CC has collapsed.

Local government needs to show that it can work with the government to revitalise local services. More evidence needs to be presented to ministers and Whitehall on the value of investment in the local.

LGC has been told, in particular, that ministers are bemused by the lack of correlation between spend and outcomes in children’s services. They have a point: the sector has hitherto offered little explanation that would convince a chancellor to offer a major CSR boost for this area of escalating expenditure.

So while it is right that the sector points out the (many) limitations of today’s Budget, now is a time to work with, and to seek to convince, the chancellor. Evidence is growing that housing and communities secretary James Brokenshire is sympathetic to councils, and he has the ear of the prime minister. The sector has just won its biggest victory in years through the lifting of the housing revenue borrowing cap. It needs to capitalise on any new-found goodwill of ministers if it seeks to make a success of the spending review.

Of course, we are operating in an uncertain environment. Brexit casts a shadow over anything and failure to secure a deal could result in a second (and more draconian) Budget. Fittingly, today’s Budget took place as the far right won power in Brazil and Angela Merkel, Europe’s most consistent stabilising force, announced she will step down in three years. Volatility is in the ascendency.

Some might question whether LGC’s call for a nuanced response to this Budget indicates that we have somehow been afflicted with Stockholm Syndrome (the need to forging of a positive relationship with those who keep us in chains, should you be unfamiliar with the Patty Hearst story). Nope. We don’t love Philip Hammond and a decade of spending cuts stinks. But the sector needs to recognise that intensifying efforts to forge a positive relationship with this fragile government is currently the only means possible of councils safeguarding their future.

Nick Golding, editor

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