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What impact will the summer 2015 budget have on local government?
Trowers Public Insight

What impact will the summer 2015 budget have on local government?

For local government, the summer 2015 budget contained few immediate surprises but the full impact is likely to be revealed as the autumn spending review progresses.

There are also some ominous signs that unfunded cost pressures arising from welfare reforms will add to the financial burden for local government for the duration of the current parliament.  On the plus side, the Chancellor confirmed that that consolidation (or cuts) will not happen at a faster rate than under the previous government.

Following the government's manifesto commitments, the Chancellor restated the government's support for devolution to areas willing to adopt directly elected mayors with a significant boost to the Northern Powerhouse - transferring responsibility for fire services, the Land Commission, Childrens' services and employment programmes to the Greater Manchester authorities.  The budget also flags the next wave of authorities likely to benefit from devolution. 

In terms of infrastructure support, some local authorities will benefit from increased spending on roads, transport and broadband.  The government is shortly to publish a new long-term National Infrastructure Plan which may include projects benefiting areas outside the Northern Powerhouse and the Midlands.

Other areas to watch include:

  • Further pay restraint in the public sector will perpetuate the challenge of recruiting and retaining staff to maintain quality public services;
  • The introduction of the National Living Wage which is likely to add to the cost of local authority services (particularly in relation to social care);
  • The longer term impact on local authorities from the welfare cuts – not just in relation to the funding of discretionary housing payments but also the cost of meeting additional demand on statutory services.
  • The financial effect of the proposed reduction in social housing rents which may impact on building and maintenance programmes, though the reductions may be partially offset by the ability to charge market rents to tenants earning over £40,000 in London and £30,000 elsewhere;
  • Proposals for pooling of local government pension scheme investments to significantly reduce costs whilst maintaining overall investment performance.  This will involve preparing detailed responses to the government's proposed consultation paper including backstop legislation for authorities that do not propose 'sufficiently ambitious proposals';
  • Potential adverse consequences of longer Sunday trading opening hours – both political and in terms of the impact on local communities and businesses;
  • Proposals to extend the government's One Public Estate Programme to local authorities in England with significant asset bases.  This may limit options to realise long term revenue streams to help with the more to self-sufficiency – particularly if the focus is on outright sale of surplus assets;
  • Whether any additional funding for the NHS will help local authorities deal with the crisis in social care provision and the costs of dealing with the Care Act 2015.

The true picture for local government will emerge in the Autumn Statement where we expect further spending cuts to be announced.  Local authorities will need to be prepared to get "even more for less" from forthcoming procurements of works and services and will be forced to make tough decisions about where public money is allocated.  The pressure to realise cost savings is going to continue and local authorities will need to innovate further to maximise their returns from available assets and stimulate local economic growth to improve tax revenues.

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