The spending review was not just about public finances. It was an opportunity for George Osborne to set out his vision for the state over the rest of the decade: a decade by the end of which he hopes to be leading the Conservative party into the next election, writes Jonathan Carr-West.
There was a general consensus ahead of the statement that the Chancellor was in a bit of tight spot, particularly in relation to welfare reform. As Alex Salmond pointed out in the debate odds on Osborne as the next PM had lengthened in the last week. In the event though he pirouetted through the difficult politics, U-turning merrily on tax credits, and emollient on the level of public spending cuts which he emphasised would continue at half the rate of the last parliament. There were also middle England giveaways on museums, sport and policing levels. Some of these looked like a naked grab for the left of centre voters.
Nonetheless, we are, of course, still looking at significant year-on-year reductions in public spending. For local government much of the detail will come in the forthcoming funding settlement. But the key question will be whether growth in business rates can keep track of the reduction and eventual phasing out of the revenue support grant. The Chancellor confirmed his party conference commitment that universal business rates would be abolished, that local government would keep the entire quantum of business rates by 2020, and that the current system of tariffs and top ups will remain in place. But that still leaves significant doubt about what sort of redistribution will be in place.
The Chancellor’s claim that local government will be spending more in cash terms by 2019/20 will be pored over. Most councils are clear that they will be making tough decisions about what services they can afford to maintain and how they deliver them. And buried in the detail were some direct hits such as the abolition of the £600 million education services grant.
So we know cuts are coming. But more important in many ways will be the other side of the ledger: local government’s ability to raise and retain money locally and to control local public spending. There was some good news here: more money in the local growth fund and better care fund, confirmation of the abolition of uniform business rates, the ability to spend the proceeds of asset sales and devolution deals on transport, planning and infrastructure. These are all good things. The ability to levy an additional 2% precept on council tax to fund social care will also be welcome. Though it’s a drop in the ocean compared to the scale of the problem and this sort of ring fencing is hardly localist.
These measures all go some way towards giving local government more money to build economies, join up spending and transform public services.
Why does this matter so much? It matters because of the limits of what central government can do.
The Chancellor can use the spending review to try and change the size of the state, but only local government can help him change the shape of the state.
So we saw major announcements on housing in the CSR, but it’s no good building houses unless you are also building communities. Housing needs to be linked to planning, social care, economic development and public service reform. Only local government can link these up in an effective and democratic way. That’s why devolution matters.
The deals we have seen announced so far are important and the Chancellor deserves credit for moving further and faster towards devolution than any UK politician in recent decades. But we should also note that we’re starting from a point of ludicrous over centralisation. Tell the people of Paris, New York or Berlin that Manchester or Liverpool now controls public transport in their area and the response would be incredulity that they didn’t already.
As we know from our annual finance survey with the MJ, there’s much more that we could do to achieve fiscal devolution: local tourism or green taxes, revaluation of council tax bands, local variation of top and bottom rates of income tax, multi-year budgets and single pools of money for local spending for example.
George Osborne talks about building a modern, sustainable economy, a country that spends less but to greater effect. If he really wants that then he needs to give every part of the country ever more control over public services and over public finances. He must make sure that his “devolution revolution” is a beginning and not an end.
Jonathan Carr-West is chief executive of the LGiU. This article first appeared in the MJ.