Big-hitting Budget adds urgency to devolution plans

In a statement filled with policy announcements, the chancellor reiterated his commitment to devolution. Councils must get their proposals to the government before they get landed with someone else’s version of localism

The first Conservative budget for 18 years was a momentous event for George Osborne and at first it looked like the occasion might be getting the better of him. By his normal bravura rhetorical standards it was a somewhat diffident, almost nervous start, leaning on a clutch of tries and tested catch phrases. Those playing budget bingo will have been off to a flying start as “hardworking families”, “long term economic plan”, “finishing the job” and “putting our house in order” all got early outings.

By the time the chancellor had been on his feet for ten minutes it looked as though this might be a duller budget than anyone had been expecting, but then – if one might be forgiven a cricketing analogy on the first day of the Ashes – he began to get his eye in and the knocks started coming.

Osborne needed to find £12bn in welfare savings and the announcements kept coming. Tax credits and Universal Credit to be restricted to two children; income threshold for tax credits to be more or less halved; working-age benefits to be frozen for four years, rents in social housing sector will be reduced by 1% a year for the next four years; higher-income households in social housing required to pay market rents.

All of this building to a crescendo and a rare budget surprise with the announcement of a new National Living Wage. Although Steve Hilton has been trailing this idea across the airwaves for the last couple of weeks, I don’t think anyone expected to government to commit to it outright. The Tory benches howled with glee, the Labour benches shifted uncomfortably and the ball sailed over the boundary.

So a big-hitting budget but what does it mean for local government? It set out £17bn of savings and deferred announcements on another £20bn to the autumn’s Comprehensive Spending Review. For local government that is when most of the specific announcements will come, but that’s not to say there was nothing consequential in the chancellor’s announcements today.

The chancellor reiterated his commitment to devolution, but we didn’t really learn anything new, but the announcement of the first county deal with Cornwall will increase the sense of urgency for non-metropolitan areas to get their proposals in to the government before they get landed with someone else’s version of devolution.

Changes to welfare and housing will, of course, have huge consequences for local government which will have to find efficiencies to replace lost social housing rents and to ensure that welfare changes do not simply create more emergency demand in other parts of the system.

Some will see this as the government irresponsibly passing on difficult decisions to councils. Others will see it as the flip side of devolution: the responsibility that comes with power.

That’s a debate that probably can’t be resolved, but what is clear is that the need for local government’s strategic leadership role is more crucial than ever if we are to move to the “lower tax, higher wage, lower welfare” society the government aspires to.

This blog was originally published as an article in Public Finance.

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    1. Eric says:

      The loss of tax credits is meant to be offset to some extent for individuals by the introduction of the national living wage; which in turn will cost companies more and will be offset by reductions in corporation tax.
      However, much of the impact of this will be felt by many service providers for local authorities who often do not pay corporation tax – such as charities and small businesses- and who provide vital services in care and other sectors. These providers will be obliged to pass the costs on to local authorities – in effect representing a further demand pressure on council budgets.

      1. Eric, that is very insightful, it hadn’t crossed my mind that the so called living wage will impact on small firms and charities. At the two charities of which I’m a Trustee try and pay a decent wage but when you are struggling on the hope that your next funding bid will see you survive for a few more months, any impact on wages costs are important also the recent pension changes have an effect. It means more reliance on volunteers whom really ought to be paid if it is affordable but that means less to take care of our vulnerable clients.

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