The Budget was grim with notable absences – but some winners


By Rob Whiteman, Chief Executive, CIPFA

Behind the jokes and the bracing patriotic fervour in parts of the chancellor’s delivery, the Autumn Budget paints a grim picture of the country’s economic outlook. Weak productivity has meant a massive downgrade in growth forecasts, while the measures announced as part of the government’s Industrial Strategy, including investment in skills training, infrastructure and research and development, will not only take time to bear fruit, but are far from certain to boost the UK’s stagnant productivity. 

Nevertheless, with a sharp short-term decrease in borrowing and the reclassification of housing debt, there was some headroom for the chancellor, with some obvious winners, but as always the devil will be in the detail.

The centrepiece was arguably the £44bn designed to reinvigorate the country’s house building sector over the medium-term through a package of investments, loans and guarantees. This formed part of a raft of initiatives that included the threat of reforms that would encourage homebuilders not to sit on land that had already been granted permission and the headline grabbing removal of stamp duty for first time buyers. We also saw changes to the HRA cap, which could be good news to some authorities wanting to invest in building, but it’s questionable whether the proposal will really have an impact at the national level. 

Another set of important announcements concerned local government, specifically moves aimed to return momentum to the devolution agenda and breathing life back into the Northern Powerhouse. Previewing next week’s Industrial Strategy, a £1.7bn Transforming Cities Fund will provide a boost to metro mayors and help develop the new North of Tyne and second West Midlands city deals. The announcement that the business rates multipler will be uprated using the September CPI, rather than RPI from April 2018 onwards, will be good news for business as it will result in lower business rates growth but will lead to lower income for local authorities. 

The other big winner was health, and faced with a chorus of demands to provide the NHS with an immediate cash injection, the government has responded with billions of additional revenue and capital funding, including an immediate £335m to help increase NHS capacity this coming winter. This is a welcome concession following a long period where the government insisted it was meeting the NHS’s financial needs. However, the £2.8bn to be allocated to frontline services, while very significant, still falls short of the £4bn NHS leaders called for, and is therefore unlikely to eradicate the sense of funding crisis enveloping the sector. The £3.5bn additional capital promised to sustainability and transformation plans over the current Parliament may go some way to underwriting the longer-term transformational actions needed to put health on a more sustainable footing.

But looking at the whole health and care system, the pressures on adult and children’s social care will continue to intensify, with knock-on effects on the NHS. Indeed, we can also expect that the 4% increase in the National Living Wage, while welcome indeed for those workers, feeds through to considerable extra pressure on the sector, as councils will have to pay significantly more for care workers.

The overall silence on adult and children’s social care was worrying. It remains crucial that adult and increasingly children’s social care services are made financially sustainable. The precept that was introduced to council tax to pay for adult social care does provide short-term support, but does not address the longer-term needs. The long awaited Green Paper has now been promised for next summer, but if adult social care has any chance of being properly addressed, the government must set out a tenable proposition for long-term funding before services start to fold. 

Children’s social care is increasingly pressing and, as we set out in CIPFA’s Changing Children’s Lives report, demand is outstripping budget and there are wide variations in both spend and effectiveness between local authorities. 

But it's not just the silence on social care that was worrying. There was no evident relief for other hard pressed services, such as police and prisons.

Finally, given the state of the Brexit negotiations, it is no surprise that the government has allocated an extra £3bn to support the UK’s withdrawal from the EU. Whether this is enough is anyone's guess.

  • This article first appeared in Public Finance

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