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Tony Travers: let's demand no council is left worse off

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“Austerity is over”. The prime minister’s conference speech received broadly positive coverage. 

A process which began in 2010, and which was supposed to be over by 2015, will now be ended by the spending review after, in Theresa May’s words, “we’ve secured a good Brexit deal for Britain”.

Philip Hammond has spoken of a Brexit “deal dividend” for the economy, as growth responds to the end of uncertainty once the UK and the EU27 have sorted out their future. Senior Conservatives are responding to a dawning realisation that years of pessimism and austerity risk paving Jeremy Corbyn’s way to Downing Street.

In truth, the UK economy is currently in the slow lane, with growth down since June 2016. Any post-deal boost (if there is a deal, of course) would at best take GDP growth back to the previous 2-2.5%. Ms May and Mr Hammond remain committed to debt reduction and to “sound” finances, so the issue they now face is how to end austerity while reducing the national indebtedness.

If the economy grows at 2.5% and real terms spending increased at a slightly lower rate, then inflation would very gradually erode national debt as a share of GDP. This outcome assumes no recession in the near future. But if there is to be any significant rise in real terms spending, taxes and/or the deficit will have to go up.

The Budget on 29 October will be an early test of changing policy. It seems likely the chancellor will concede some tax rises. He now has to pay for the £20bn+ NHS funding boost promised by Ms May, the housing revenue account reforms recently announced, plus more money for services such as the police, defence and prisons which are seen to be under extreme stress.

Where does this leave local government? As ever, towards the back of the queue. But with the implementation of the so-called fair funding review in prospect, local government could reasonably lobby for the introduction of any funding reform to lead to a position where no council was left worse off in real terms. That would be a radical change from eight (by then 10) years of austerity.

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