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Andrew Burns: Hammond could solve short-term finance woes with business rates move

Andrew Burns
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Will the chancellor’s Budget on 22 November contain any positive news for the public finances and local government?

Whilst much rhetoric is suggesting austerity is over (or rather, the public is tired of that narrative) the chancellor will no doubt emphasise that we will still need to live within our means and a growing economy is needed to generate the tax revenues to fund public services.

The clamour for more resources to invest in the NHS, social care, infrastructure, schools, public service pay, housing and fire safety is building and it seems likely there will need to be some further investment to improve public services, public confidence in them and to get a budget passed in the House of Commons with a slim majority.

Recent economic forecasts from the International Monetary Fund, the Bank of England and the Office for Budget Responsibility all point to sluggish economic growth with the public finances remaining tough for next five to ten years as we move through Brexit.

So disappointing as this sounds, local government – save perhaps for social care – will not be at the front of the queue if there is to be any further public investment.

However it is not all doom and gloom. Devolution, localism and the (albeit slow) moves towards councils becoming self-financing provide some opportunities to make better use of local resources, with full control over council tax, business rates, better use of public assets and greater civic commercialism.

But this, combined with societal changes, will require different conversations between local partners and the public about the role, size and shape of the state. Improved digital access and literacy could be both a catalyst for and transformer of this.

In the absence of any more money, there are real opportunities for councils if they can position themselves to contribute to the agenda for health and wellbeing, inclusive growth, new housing, lifelong learning and skills and in shaping places to make them attractive to skilled workforces, who pay council tax, and businesses, who pay rates.

The industrial strategy, I hope, will be a key driver. Stronger regional and local economies are needed to generate the tax revenues to both pay for public services – especially the NHS and welfare state – and reduce the need for them through better jobs, skills, productivity and improved health and wellbeing of citizens.

Rather than just being a provider of local services, councils need to use their democratic legitimacy to show how they can convene and lead conversations in places that can improve wellbeing, strengthen communities and increase prosperity. Literacy, reading and learning are crucial to the skills agenda; culture and creative activity make great places and build strong communities and who is better placed than libraries to improve digital inclusion?

Achieving a sustainable funding regime for social care, which is an inevitable financial consequence of an ageing population, remains vital. It is also important – but sadly not yet accepted by the government – that more money is spent on transformative and preventative action to help reach a sustainable long-term position. The promised social care green paper is looking increasingly unlikely to materialise, certainly before the end of the year, but government still needs to set out what is required to reach a tenable and equitable position.

In the meantime there is one specific proposal the chancellor could announce, without the need for primary legislation, which would make a significant positive difference. That is to release the 50% of business rates currently held by the Treasury (estimated at £13bn by 2019-20) without transferring any additional responsibilities to local authorities alongside it.

This would address the local government funding gap, identified by the LGA as £5.8bn by 2019-20, fund the immediate £1.3bn required to stabilise the fragile adult social care provider market and address other unfunded pressures such as in children’s services and local authority housing, whilst a medium- to long-term sustainable solution is developed in the next Spending Review.

Andrew Burns, director of finance and resources, Staffordshire CC and president, Chartered Institute of Public Finance & Accountancy

@CFOstaffscc

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