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Tony Travers: July Budget contains two key messages

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The Budget contained a number of surprises for local government.

The biggest was the chancellor’s decision to increase the national minimum (or ‘living’) wage to £9 per hour by 2020. But changes to the planning system, revealed two days later, also pose a significant challenge to councils.  

As expected, public expenditure will be reduced to 36% of gross domestic product by the end of the decade. The year when the deficit is finally eradicated will move forward a year, to 2019-20, and public expenditure will be slightly higher than previously planned in the years from 2016-17 to 2018-19.

Pressure on ‘unprotected’ budgets will remain. Indeed, defence has now been added to the ‘protected’ services. The Office for Budget Responsibility predicts the squeeze on departmental current expenditure (which includes local authorities) will fall at the same rate between 2014-15 and 2019-20 as between 2009-10 and 2014-15. 

Councils can expect revenue spending to fall by a further 20 to 25% by the end of the decade.  According to the Local Government Association, the national living wage commitment will push up contract prices in the care sector, adding perhaps £1bn to budgets. No doubt ‘efficiencies’ will be expected to pay for these higher costs.

In the Treasury’s productivity document Fixing the Foundations, it is stated: “The government will also take steps to ensure that local plans are more responsive to local needs”. 

This fascinating use of English means Whitehall will override local objections to new housing. Ministers want to stop NIMBYs by liberalising planning except in green belts.  

Large development schemes with a housing element may be determined nationally. Local plans may be imposed in councils. Housing on brownfield sites will, in principle, receive automatic planning permission. The threshold for the mayor of London to ‘call in’ planning applications will be reduced to 50 home schemes from 150 at present.

In a rare example of true localism, councils will be able to make decisions about liberalising Sunday trading rules. But the overall messages of 2015’s second budget were that council budgets face further stress and, separately, planning decisions are being transferred to higher levels of government. Now, we must await the autumn spending review.     

Tony Travers, director, Greater London Group, London School of Economics

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