Mini Budget 2022: What does the Growth Plan mean for local government service sustainability?

*For the latest information please see our mini budget summary

Levelling up and devolution remains integrated into the Growth Plan, with an explicit link between the planned tax cuts and investment zones intended to help parts of the country attract new business and drive economic growth.

Whilst low tax zones will help some parts of the country attract new business and drive economic growth - although we all remember how the growth spurt from Local Enterprise Zones fizzled out back in the 1980s once the tax breaks ceased - the immediate fiscal cliff edge continues to get closer and closer.

Back in March 2020, the sector stepped up to the plate to support the country in dealing with the once in a generation pandemic. It reconfigured itself to ensure it could continue to deliver essential services and, administered millions of pounds funding to local businesses.

In large parts of the country, local government now fills the void left by Government in dealing with the cost-of-living crisis.  However, staff, who have seen their pay stagnate are now at breaking point with industrial action a real possibility. It is only a matter of time before core local government services are at risk and councils up and down the country need to make the toughest decisions that they have ever made, on how best to use the finite and ever dwindling resources that they have.

In our view there were 8 key areas in the announcements today that are directly relevant to local government.

1. Levelling Up and Investment Zones are intended to drive growth and unlock housing development. Areas with Investment Zones will benefit from tax incentives, planning liberalisation, and wider support for the local economy. In particular, business rate relief will be granted at 100% for newly occupied business premises, and certain existing businesses. Within these Investment Zone tax sites, the administering Council will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.
   Partnership working amongst local authorities, including devolved combined authorities is going to be essential in providing the leadership and governance to administer and support these ambitions. These should be an opportunity for some parts of the country but is 10 years long enough and, how will their impact be measured?
2. We’re pleased to see that the need to tackle climate change is Included within the Growth Plan with a planned independent review to report back at the end of 2022. Most directly relevant is an £2.1bn application programme for local authorities, housing associations, schools and hospitals to invest in energy efficiency and renewable heating.  Many public sector organisations have raised concern about lack of funding to support their commitments, but it needs to remain a key focus area for local authorities if we are to stay committed to tackling climate change – do local authorities fully understand the task ahead of them?
3. Infrastructure - new legislation will be brought forward to reduce what the Government deems to be ‘unnecessary burdens’ to speed up the delivery of infrastructure.
   Where local authorities are delivery leads, how will they ensure these major projects are subject to robust financial costing given inflation and interest rises and, do they have the capacity to effectively project manage them?
4. Whilst the plans to reform the planning system to dispose of surplus government land and the creation of investment zones all have the potential to help boost supply of new homes. This could present a challenge between the social housing sector and local councils, who have sustainability and climate as a strategic aim. The devil will be in the detail on how it would work and its role in delivering the growth the government is seeking, including a much-needed supply of affordable housing.
5. The Energy Bill Relief Scheme extends to public sector bodies.  Now that we are adapting to new ways of working, how are local authorities taking a more strategic approach to asset management and could this be better aligned to today’s announcement to speed up housing development through the use of government owned land?
6. Reforms to the Universal Credit (UC) conditionality to support claimants on UC to secure more or better paid work. How much of a burden will this place on local government?
7. The ongoing commitment to housing development by speeding up planning is intended to tackle the increasing deficit in supply, however it doesn't tackle the immediate concern: what is the financial and societal implications for this year's rent increase given the current rate of inflation?
8. 'The planned social care levy is being cut, which is a blow to the increasingly strained social care services despite the maintenance of existing funding levels. So how will authorities tackle the supply deficit, dwindling number of carers, and increasing demand and complexity across adults and children’s services?  

Next steps

Please do get in touch to discuss this further and we’ll be happy to help you understand what today’s announcements mean for you.

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