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CIPFA today responded to key budget announcements. Overall, while GDP growth forecasts remain high compared to other developed economies, low UK productivity remains a real problem. Low inflation means interest rates are likely to remain low which is good for public services as it keeps the cost of borrowing low.
CIPFA welcomes action to tackle tax loopholes but believes they don’t go far enough. We call for a systematic review of the personal and corporate tax allowances. We firmly welcome the Sugar levy and back the Chancellor in supporting public health outcomes. We also welcome investment in infrastructure, flood defences and strong plans for devolution.
However, the institute is concerned that liabilities, such as student loans, PFI and clinical negligence claims, all of which are shown in the Whole of Government Accounts, have not been addressed at all. These will greatly affect future budgets but have not been mentioned.
In a statement, CIPFA CEO, Rob Whiteman, raised concerns about government medium-term planning and the impact tax changes will have on local authorities. He said:
“This is a budget of surprises. Big changes since the Autumn Statement, just three months ago, show a failure to plan for the medium term.
“The Tax cuts announced show that the Chancellor has chosen to make £3.5bn extra cuts to public services, rather than it being entirely necessary.
“While councils will welcome reduced costs for small businesses, they are likely to feel as though they’ve been stitched up. Business Rate revenues are planned to replace Whitehall grants but have now been cut with no warning.
“We will monitor plans to compensate councils closely to make sure they’re not left out of pocket. We wish to check HMT assurances of ‘compensation’ is hard cash and not just ‘spending power’ sleights of hand.
“Raising employer contributions for public sector pensions is a stealth cut – meaning money is diverted from services back to the Treasury.”
The institute also called for urgent clarity on plans to fast-track business rate retention for the Greater London Authority and how this affects the review of rate retention.
CIPFA was also disappointed that there will be no strategic role for councils in education. Moves to make all primary and secondary schools academies which are only accountable to the Department for Education means highly centralised system of education.