Budget Hints at Greater Local Autonomy, But the Detail is Still to Be Revealed
Author: Barry Maginn, egov Monitor |
The budget threatened to be eye-watering, and while not insignificant, many of the announcements were less painful that perhaps could have been expected says the author.
A lot of the measures seem relatively sensible, tightening of the belt maneuvers rather than swingeing cuts. Indexing benefits and tax credits to CPI rather than RPI is a proposal that makes sense at any time, never mind when massive savings are to be made, while no one can really be shocked that housing benefit claims are to be capped at 400 a week (apart from the family who received 104,000 in housing benefit, it must be presumed).
That said, it was not an easy budget, and many of the real, noticeable cuts will be felt when the fine detail is announced for some departmental cuts in the region of thirty per cent. The V.A.T. increase has also caused many to declare the ‘progressive’ budget actually rather ‘regressive’, quoting Cameron’s previous comments regarding V.A.T. that he now wishes he never uttered.
However, to focus merely on the immediate spending cuts and tax increases is to miss the longer-term vision the budget has set out. This was a budget that not only aimed to reduce deficits; it was also one that promised renewed optimism through a focus on rebalancing the economy with a new model for invigorating growth.
Between the cuts, the government has bravely provided a range of financial breaks and support to drive economic growth that is less reliant on one industry (the financial sector) and on one region (London).
The government also appears committed to a new way of promoting this growth, allowing natural economic geographies to lead in ways that the last government never did. This budget promises many exciting possibilities for proponents of greater devolution and for regional regeneration in general.
The Regional Development Agencies (RDAs) have, perhaps surprisingly following the indecision over whether the coalition would actually give them the axe, been scrapped. While the RDAs may not have been as obsessed with moving funds around public sector bodies as some recent claims would suggest, they are hugely bureaucratic and undemocratic bodies which do not work along real economic boundaries, and which have failed in their aim to decrease regional disparities.
In their place we will see Local Enterprise Partnerships (LEPs), which will be more directly accountable, with elected representation. Councils are likely to play a large part. LEPs will focus on private and public partnership and investment in ‘natural economic areas’, with major cities being specifically targeted as drivers of joint public/private investment. This is a very sensible option, as our report ? ‘Can Localism Deliver?’ ? has shown, city regions, as well as historical county boundaries, are the often the most appropriate drivers of growth locally.
Scrapping the RDAs does not mean that the current government is not concerned with reducing the huge, and growing, disparities in economic growth between regions that the last 13 years has witnessed, however. The budget announced a range of measures to help regions that rely heavily on the public sector benefit from a sustainable recovery, led by the private sector.
National Insurance Contribution breaks for new businesses that set up in areas in need of a stronger private sector, for example, will act as an incentive for local entrepreneurs, and may also help to make new regions attractive to new start-ups, perhaps creating burgeoning niche industries around the country.
Somewhat cryptically, the budget announced that the ‘government will consider the most appropriate framework of incentives for local authorities to support growth’. We have consistently argued that local authorities should capture the benefits of local growth. There is little incentive for a council to take risks investing in future growth if all increased capital return (through higher tax revenues) is snatched by central government, with no windfall for the innovative council.
This has been recognised by the coalition government. It is not yet clear, even to central government itself, how it will reward authorities that drive growth, but is seems likely that councils may retain more control over council and business taxes that are collected locally, from which they can further reinvest in the local area.
There is still a lot of fine detail that we will have to wait to learn more about. The budget contains several mentions of ideas still to be considered and hints of further details in the up-coming white paper.
It will be interesting to learn more about whether the LEPs will truly be locally led, with flexibilities and financial control given directly to local authorities, or whether there will be an element of central government control. The Regional Growth Fund announced in the budget, which aims to support regional capital projects proposed by public and private bodies, is likely to use funds currently under RDA control, and certain commentators are predicting it to potentially be a sizable pot. However, it will be insightful to learn how it is to be administered. Will approval for projects have to be ‘earned’? Or will central government trust local authorities to spend the funds appropriately and divide it out accordingly?
The budget has shown that the government puts a priority on the economic potential of infrastructure programmes. Will a commitment to greater private sector investment in infrastructure, with a concurrent focus on productive public investment expenditure, lead to a greater role for local authorities in coordinating infrastructure projects as locally prioritised?
It would appear that the coalition government considers the role of the local authority as important in respect of planning. It has promised a ‘locally driven planning regime’ that is simplified and that is focused on areas in need of business growth.
However, the budget also announced Infrastructure UK, which appears to be a Westminster quango that will lead on attempts to engage private firms in infrastructural projects. Potentially Infrastructure UK could act as a top-down body directing regional infrastructure from the centre, with little local input.
It is too early to comment on whether a commitment to productive public capital expenditure will lead to more local planning capabilities. In the short term, however, many towns and cities will be breathing a sigh of relief that local transport schemes have been spared from the chopping block.
The economy is to be rebalanced, that is the major lesson to be learnt from Osborne’s first budget. A large part of this rebalancing will be economic development initiatives and partnerships focused on regions that currently have an underdeveloped private sector. Just how far this rebalancing will be led locally, and what exact role local authorities will have in directing the initiatives, remains to be seen. We await the white paper detailing sub-national growth with great anticipation.