Although we’re all acutely aware of the considerable toll the pandemic has taken on the economy, the damage read out at the despatch box, blow-by-blow as part of the chancellor’s Spending Review, was a sobering reminder of both the harm already wrought and the scale of the challenge still confronting us.
This wasn’t the multi-year settlement originally envisaged, nor will it offer local government the certainty one could have provided. But, given the precarious and changeable circumstances we find ourselves in – in which the economy is forecast to contract by 11.3% this year (the largest fall in output for 300 years) – it makes sense to adopt a more flexible strategy, allowing us to respond nimbly to the immediate priorities before taking stock of where we are next year.
Unsurprisingly, the chancellor’s statement included more money for the holy trinity of any government – hospitals, schools and crime – and perhaps gave us the greatest insight so far of how ministers hope to nurture that hallowed V-shaped recovery. Indeed, promoted to the Treasury’s top job just weeks before the turbulence of the first lockdown, there has been much speculation among pundits of what ‘Rishinomics’ might mean in real terms. If the Spending Review is anything to go by, it looks like a Keynesian approach (albeit, I suspect, a reluctant one) with a big focus on infrastructure, something that will help create jobs and plays to the Government’s levelling up agenda.
For local government, the announcements will represent a mixed bag. They bring cash, and not an insignificant amount, with £3bn to help deal with COVID-19. That includes an additional £1.6bn of grant funding to meet service pressures and an estimated £762m to compensate for 75% of irrecoverable loss of council tax and business rates revenue. The Review also provides a potential increase of 4.5% in core spending power and an extra £300m in grant money for social care. While welcome, let’s be clear, neither the sum nor the means delivers the long-term solution the sector needs.
In London alone, there is a predicted funding gap of more than £500m in 2020-21 as a result of the pandemic, not to mention a £130m shortfall in social care. The last Government had a great fondness of talking about ‘JAMs’ – those just about managing to stay afloat – but it is the current crop of ministers that must recognise the vast majority of local authorities now fall into this category.
For a number of years, councils have frantically been bailing out the water seeping in from all directions. While the Spending Review provides council officers with another bucket to help ease the task, what’s ultimately needed is a complete repair job of local government finance. Colleagues at the Ministry for Housing, Communities and Local Government undoubtedly understand that, but the challenge is getting reform sufficiently up the Treasury’s agenda, among many competing priorities, to ensure this entrenched problem is addressed and lasting change secured.
The announcements of a UK Infrastructure Bank, based in the North of England from next year, is good news, as is the £4bn levelling up fund. On the latter in particular, a clear and transparent criteria must be set out as soon as possible, not only to ensure fairness but also deliverability. Projects of up to £20m are eligible on the proviso that they can be completed this Parliament, which, with four years left to run, may seem ample time, though that deadline will soon come round.
Less clear is the Government’s commitment to the future of devolution, with the fund posing more questions than answers. I imagine the jury will remain out for some time yet on whether these improvements could not have been better managed at the local level by empowering municipal leaders rather than through the administration of three central government departments.
All in all, there was much in the Spending Review to applaud, including announcements on rough sleeping, skills and a new £7.1bn National Home Building Fund. While the news of successful vaccine trials rightly gives us cause for optimism, the main message of the chancellor’s statement was palpably less upbeat.
In short, there’s still a mountain left to climb. For now, we remain firmly in the foothills.
Sir Bob Neill MP is a former local government minister and is chair of the Commons Justice Committee