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Not long now until the Chancellor gets to his feet to deliver his Spending Review – here’s a quick round-up of some of things to look out for:
1) Local Government is expected to face significant additional budget cuts;
2) Several Government Departments are expected to remain protected from cuts, including health, schools and aid;
3) Lord Heseltine’s much anticipated Single Local Growth Fund will be introduced but on a much smaller scale than initially envisaged. The announcement may also come tomorrow, not this afternoon;
4) Community Budgets are expected to be rolled out more widely across the country;
5) Small additional monies may be made available for housing and infrastructure investment; and
6) More clarity is expected on where previously announced sums for infrastructure investment will be allocated over the coming five year period.
Here at the Centre, we have been making the case for any further cuts to local budgets to be aligned with additional powers and freedoms that can help authorities implement them.
You can download our recent report looking at the future of local government finance here
And our Spending Review briefing paper here: http
My colleagues will be live-tweeting through #SR2013 too – you can follow Centre for Cities Chief Executive Alexandra Jones at @AlexJonesCities.
Aside from the scale of anticipated cuts, much of the focus ahead of the Spending Review today has been on the size of Lord Heseltine’s proposed Single Local Growth Fund.
The consensus is that the amount put into the Fund will be much lower than the initial £49bn mooted by Lord Heseltine.
Here at the Centre, we think that for the Fund to have the desired impact, it should be at least £5bn. This would be of sufficient size to enable some funding to be allocated to each of the 39 Local Enterprise Partnership (LEP) areas, while also leaving a substantial amount available for allocation on the basis of a competition.
If the Fund is smaller, for example, £2bn, then we would want the Government to set out a clear direction of travel for future funding as well as making additional powers available.
Read our full briefing on the Single Local Growth Fund here
It’s also worth remembering that with Danny Alexander due to announce more detail on capital investment tomorrow, we are likely to only have a partial picture of the implications of this Spending Review today.
The Spending Review spinning has already begun as David Cameron and Ed Milliband joust at PMQs – the Labour leader attacking the Government on their previous pledges to boost infrastructure spending.
It’s also important to remember that local economic growth is not simply about the amount of money available; it is also about control.
Alongside announcements on budget cuts, or the Heseltine Local Growth Fund, we would like to see Whitehall set out a series of specific reforms that give local areas more control over the money they spend.
For example greater control over awarding Skills Funding Agency monies based on further education colleges responding to local targets, or over Highways Agency decisions on road infrastructure that have growth implications.
I expect we will get more detail on some of the infrastructure investment commitments made in the Budget earlier this year, either today or tomorrow.
At that time, the Chancellor set out plans to provide an additional £3bn investment each year over a five year period from 2015.
And here we go, the Chancellor is on his feet…
Osborne: the economy has been brought back from the “brink of bankruptcy”.
The Spending Review underpinned by three principles – reform, growth and fairness.
Overall spending figures from Osborne:
– Government set to borrow £108bn this year
– £6bn per year saved on servicing debts
– The deficit is 7%, but has fallen by a third
– Until 2017/18 total managed expenditure will continue to fall in real terms at the same average rate as it is today
– In 2015/16 total managed expenditure will be £745bn
Osborne: we need to get more for our money on public services. A further £5bn additional efficiency savings anticipated in 2015/16
Osborne: Automatic progression pay in civil service will be ended by 2015/16. Public sector pay rises limited to 1% in 2015/16. “There will be further reductions in number of people working for the public sector”.
This will have implications for those cities where public sector employment is highest, such as Swansea, Liverpool and Newport.
Extension of Troubled Families Programme announced as Communities budget cut by a further 10% in 2015/16. Eric Pickles is the “model of lean Government” according to the Chancellor.
Osborne announces that funding for councils to freeze council tax extended for two years from April 2014.
HESELTINE ANNOUNCEMENT: The Single Local Growth Fund will be £2bn. That’s £10bn over five years.
Lord Heseltine is likely to be very disappointed with that announcement on the Single Local Growth Fund – initially he had hoped it would total £49bn over 4 years.
To put the announcement on the Single Local Growth Fund into perspective, £2bn is broadly equivalent to the amount underpinning the Regional Growth Fund (albeit the SLGF is a per year sum).
Read the Centre for Cities’ thoughts on what a £2bn Single Local Growth Fund would mean for cities, and how we think such a sum should be administered to get the most from it:
£2bn for the Single Local Growth Fund is also broadly similar to the annual budget of all of the Regional Development Agencies before government spending cuts took effect in 2010/11.
We will have to wait until Danny Alexander’s announcement tomorrow for more detail on the Single Local Growth Fund, and how it will be allocated.
CAPITAL INVESTMENT TO RISE: Commitment to £50bn capital investment in 2015/16, with £300bn capital investment up to 2020.
Danny Alexander to outline £100bn of infrastructure projects on Thursday.
The Mayor of London to receive additional £9bn capital spend and additional financing powers up to the end of the decade
“Planning and investing for the long term” appears to be a big theme of Osborne’s announcements so far…
Transport capital budget increasing to £9.5bn while science capital budget has also increased to £1.1bn
The Education Department budget increasing to £53bn in 2015/16, with power passing from town halls to schools.
Osborne: “While grants to councils will be reduced, the cash to schools will go up”.
The Chancellor also promises to reform the allocation of funding to schools across the country.
Education capital budget set at £4.6bn in 2015-16. Funding for 180 new free schools in 2015/16, and £21bn of capital investment for education facilities penciled in for the next Parliament.
Significant shifts towards increased capital investment throughout the Chancellor’s statement so far, but announcements still represent a 25% reduction in real public investment.
Further detail on Government welfare reforms:
– a welfare cap (as announced in the Budget) to control overall public spending on benefits will not include the state pension
– a new programme called Work Search will be implemented. Job seekers must sign up to this programme before they can claim any benefits.
– there will also be a new 7 day wait before any benefits can be claimed.
– all claimants will need to speak English, or be in the process of learning.
Total welfare savings in 2015 anticipated to be £4bn
And the Chancellor concludes his statement. I’ll be posting a summary of the announcements most relevant for UK cities shortly.
In the meantime, Shadow Chancellor Ed Balls gets to his feet…
SUMMARY: Here is an overview of some of the key announcements for UK cities
– The Heseltine Single Local Growth Fund will total £2bn per year over five years, this is significantly lower than the initial £49bn over four years proposed by Lord Heseltine. More detail will be provided on this by Danny Alexander tomorrow.
– Significant local government budget cuts announced – a headline cut to local councils of 10%, but Government keen to stress that additional sums through measures like an extension to the Troubled Families Programme mean the true figure is far less. In addition funding for councils to freeze council tax was extended for two years from April 2014.
– Significant sums of capital investment were announced – commitment to £50bn capital investment in 2015/16 (although it seems that is a gross figure and does not actually represent a rise of projected spending that had been anticipated). A further £300bn capital investment planned up to 2020. Danny Alexander to outline £100bn of infrastructure projects tomorrow. The Department of Transport capital budget is increasing to £9.5bn while science capital budget has also increased to £1.1bn.
That’s all for now folks – thanks for following, and look out for our reaction and the implications for UK cities over the coming days.
I will be back live blogging Danny Alexander’s announcements tomorrow.
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