PBR blues

The Pre-Budget Report has significant implications for local government. Local Government Lawyer highlights some of the key measures and gauges the sector’s reaction.

Key elements of the Pre-Budget Report from a local authority perspective

• Department spending in 2010/11 unchanged;
• Public sector current expenditure to grow by an average of 0.8% a year in real terms from 2011/12 until 2014/15;
• NHS frontline spending to rise in line with inflation. Spending on frontline schools will rise by 0.7% in real terms and spending on 16 to 19-year-olds will rise in real terms by 0.9% this year;
• £12bn of savings across the public sector by 2013/14 through “smarter government” and £5bn of savings by 2012/13 to streamline public services and stop lower priority spending;
• Improved targeting of regeneration and housing growth funding to save £340m;
• Clamping down on fraudulent access to social housing tenancies, rationalising smaller Communities and Local Government funded community programmes and ending time-limited DCLG schemes to save £160m;
• Reduction in variations in spend on residential care – including greater use of preventative approaches to care for older people allowing people to stay longer in their homes – to save £250m;
• 1% cap on public sector pay in 2011/12 and 2012/13;
• Reforms to public sector pensions from 2012/13 onwards by capping contributions of employers and requiring higher earners to pay enhanced contributions;
• More land to be brought forward for development through improving local authorities’ five-year land supplies by carrying out comprehensive checks, publishing results and withholding incentive funding if they are not in place (to be set out in Budget 2010);
• Scaling back s.106 requirements to reduce regulation and impose fewer constraints on house building;
• Enhanced role for local authorities in planning and enabling housing growth locally, and in building new social housing – to include scope for local authorities to borrow against revenues from new council homes;
• £200m will be made available to improve energy efficiency, by offering £400 for up to 125,000 households in a boiler scrappage scheme;
• Reduction in average guideline rent increase for 2010/11 from 6.1% to 3.1% for local authority tenants;
• Establishment of Infrastructure UK to advise government on long-term national infrastructure priorities and develop strategy for national infrastructure.

The reaction

John Denham, Communities Secretary

“This is a fair and challenging outcome for local government. There will be a further 4% increase in resources for councils in the coming year because this is still the right time to be investing in local services to help lock in recovery.

“But local government – like national government – will have to share in the tough choices that need to be made in the years ahead to enable us to reduce the deficit, ensure that the economy and jobs grow and to protect frontline services which matter to most people. This will include tough decisions on top pay, on the costs of senior management and how local authorities organise their services.”

Local Government Association

“It is good news that the Chancellor has recognised in maintaining his 2010/11 spending commitments that councils need stability with which to plan ahead. But there remains significant uncertainty about funding for most areas of local government beyond 2011.

“Cutting central bureaucracy, streamlining the number of government targets, reducing the level of ring-fencing, bringing together funding streams and pooling local budgets are what we have been campaigning for. But it is frustrating that we will have to wait for the detail to be set out in further reviews ahead of the 2010 budget, or in some cases, the 2011/12 financial year.”

Tony Travers, director of the Greater London group at the London School of Economics (writing in The Guardian)

“It is almost inevitable that ‘discretionary’ provision such as libraries, leisure facilities, the arts and grants to voluntary groups will be squeezed or stopped. There may even be pressure from councils for the government to allow charging for services that have previously been free at the point of delivery. We are entering uncharted waters. Even the deep cuts of the IMF visit period in the mid-1970s or Margaret Thatcher's spending onslaught of the early 1980s will have been less dramatic than what now lies ahead.

“Intriguingly, in private council leaders and senior officers are surprisingly untroubled by the scale of the spending reductions they now expect to make. There is no panic and no belief the coming period cannot be handled. But the public will notice a difference. The big question is: how far can council leaders explain that what they are doing is because of the government's public spending decisions? Will local voters blame town halls or Whitehall?”

Andy Sawford, Chief Executive of the Local Government Information Unit

"Alastair Darling has postponed the pain. Borrowing will be only marginally reduced in 2010, storing up huge reductions in public spending in 2011 and the years that follow, even if a recovering economy generates more money for the Exchequer. The Chancellor missed the opportunity presented by Total Place to join up local public spending to do more for less. Instead, by ring fencing a two-year real terms increase for schools and hospitals, he has created an uneven playing field in local public service delivery and undermined the rationale and enthusiasm for bringing services together in a more efficient and effective way.

"Councils have been working hard to keep their communities afloat through the recession, and the lack of clarity on spending past 2011 will not allow town halls to prepare for inevitable cuts with the innovation they excel at. By attacking bankers instead of fundamentally reforming the way the UK is governed by freeing up councils to act, the Chancellor has missed a trick."

Sir Bob Kerslake, chief executive of the Homes and Communities Agency

“The Chancellor has put forward a series of measures that allow us to maintain the momentum of our investment programme and at the same time build on the innovative approaches that we already have underway, such as the Private Rental Sector and Public Land Initiative.

"Creating an environment that attracts more institutional investment into the private rental market; freeing up a greater supply of public land; and increasing the impact of local authorities on housing delivery are all significant shifts that will help stimulate the housing and regeneration sector."

John Jackson, joint chair of the Association of Directors of Adult Social Services’ Resources Network

“Some authorities are already planning to make efficiency savings of over 4% next year. It is naïve to assume that local authorities can simply make further efficiency savings of at least 1% more, in addition to those already found, in the absence of any new government initiatives designed to help local government or promote closer working and better resource utilisation between the NHS and local government.”

Institute of Fiscal Studies

“The Chancellor said that the extra spending in these two years would allow modest real increases in spending on ‘frontline’ schools and no real cuts in the ‘frontline’ National Health Service (whatever they may be) plus no cuts in police numbers. But this will leave remaining public services (presumably including the likes of housing, transport and higher education) facing severe real cuts.”

Chartered Institute of Housing

“The Pre-Budget Report gives the clearest indication yet that housing will continue to be squeezed in the fight for a share of public spending over the next few years. Health, education and policing appear to be the only areas of government policy with guarantees of public expenditure growth.

“The housing sector can take some crumbs of comfort with the government’s decision to maintain its high levels of public borrowing through to the end of 2011 to safeguard public services and support the economy. The decision means that government will continue to honour its housing pledge to build 112,000 affordable homes over two years and extend, by six months, the Support for Mortgage Interest scheme which helps homeowners who have experienced a fall in income to remain in their homes.”