We need investment on a wide scale to stitch back the fabric of our neighbourhoods.
-Tony Armstrong, Locality
However, the Chancellor Sajid Javid announced last month that this year’s Spending Review would take the form of a fast-tracked one-year Spending Round. The government rationale for this was to give them “the time and space to focus on delivering Brexit”.
Multi-year spending reviews generally require lots of negotiation between Ministers, civil servants, external pressure groups and others. So, in the current political climate – where Whitehall and Westminster capacity is severely limited – a one-year Spending Round seems to make sense. However, a multi-year review gives departments long-term, sustainable funding and the ability to plan. Yesterday’s announcement does not do that.
It’s also important to note that Sajid Javid’s speech and the broader settlement were delivered in the context of an almost inevitable election in the coming weeks. Rather than a longer-term analysis of the economic outlook and future demand for services across government departments, it’s a settlement that is geared towards the polls.
The 2019 Spending Round announcements
Sajid Javid, in his speech and through the Spending Round paper, announced:
- A total of £13.8bn extra spending.
- A further £2bn for Brexit delivery (on top of the £2.1bn he announced in his first few days as chancellor).
- An ‘infrastructure revolution’, which will focus on physical infrastructures like transport and digital connectivity.
- New funding for the police, NHS, schools and prisons, as Boris Johnson had indicated in his first few days as Prime Minister.
- Increased local government spending power, including money ring-fenced for social care.
What the funding announcements mean for community organisations
The most relevant sections of the Spending Round for Locality members relate to the funding settlements for the Ministry for Housing, Communities and Local Government (MHCLG) and the Department for Digital, Culture, Media and Sport (DCMS).
The increase in local government spending will be of interest to Locality members – many of which have close relationships with local authorities. Local government has shouldered the heaviest burden of austerity in recent years, so a real-terms increase in funding will be welcome.
Local Government Core Spending Power is estimated to increase by £2.9 billion in total in 2020-21. Of this £2.9bn increase, £1bn is earmarked for social care. The government will also consult with local authorities on the possibility of increasing Council Tax by up to 2% to provide an extra £500 million for social care.
Public health funding will also be increased, through the Public Health Grant and the NHS contribution to adult social care through the Better Care Fund.
The Chancellor, in his speech, announced that he would be asking DCMS to develop a new ‘Youth Investment Fund’ and to set out plans to build more youth centres, refurbish existing centres, and deliver high-quality services to young people across the country. However, there wasn’t any detail in the Spending Round document – we’ll seek to engage officials in DCMS to hear more about this announcement.
The government also confirmed yesterday the £3.6 billion Towns Fund that had been announced in Boris Johnson’s first few days as Prime Minister.
What’s missing from the 2019 Spending Round?
There was notably no mention of the UK Shared Prosperity Fund (UKSPF). This has been a key concern for Locality members in recent months, as we’ve sought clarity on what a replacement to EU structural funding might look like. The Communities in Charge campaign has set out how we think the fund should be designed – and how at least a quarter of the fund should be devolved directly to local people to invest in their own priorities for the economy
Given the ongoing uncertainty surrounding the Brexit process, the government have clearly chosen to steer clear of making announcements which relate to our post-EU settlement. However, a consultation on the UKSPF has been promised for more than a year, and pressure is increasing on government to make its intentions known.
The Spending Round also represented a missed opportunity to strategically invest in our communities. As Locality chief executive, Tony Armstrong, said in a press statement yesterday:
The Chancellor promised an “infrastructure revolution.” For at least a decade we have seen the hollowing out of our vital community and civic infrastructure. Our community spaces sold off by cash strapped councils. Our vital local services cut to the bone. We need investment on a wide scale to stitch back the fabric of our neighbourhoods. This is why Locality have been leading calls for a £1bn Community Ownership Fund – to invest in our community spaces and boost community ownership.
The spending increases announced yesterday certainly don’t take us back to pre-austerity levels.
Is austerity over?
In the opening few lines of his speech, Sajid Javid told the House of Commons that “we are turning the page on austerity and beginning a new decade of renewal”. Some have interpreted this as a claim that “austerity is over” – something we’ve heard before.
New Economics Foundation analysis suggests that it will “take between 4 and 11 years to return departmental spending to 2010/11 levels, depending on the definition of like-for-like departmental spending”. So, the welcome spending increases announced yesterday certainly don’t take us back to pre-austerity levels. However, claims of a ‘new page’ and a new direction for fiscal policy certainly were on the agenda.
Sajid Javid said that the government would review the ‘fiscal framework’ further in next year’s budget so that it meets the ‘economic priorities of today rather than those of ten years ago’. This points to a shift away from the emphasis placed on ‘tightening the nation’s belts’ introduced by George Osborne and continued by Philip Hammond.
However, Brexit hangs over all of this. A no-deal Brexit would likely have a damaging impact on the economy (that’s why we, alongside others, have called on government to avoid it) and may indeed shift the economic priorities of tomorrow closer to those that underpinned George Osborne’s austerity drive.
So, while the shift in tone and increases in spending announced yesterday are of course welcome, the volatile political environment means that all manner of economic futures may be on the horizon. Further government spending announcements will necessarily take place in a very different context to that of today.
Further reading on the 2019 Spending Round
• Charity Finance Group – Joint letter, to which Locality are a signatory, on civil society’s key priorities for the Spending Round
• ACEVO – Joint letter, to which Locality are a signatory, on the democratic risks of proroguing parliament
• NCVO – Spending Round 2019 – An End to Austerity or a Pause?
• Local Government Chronicle – Key figures in local government react to the Spending Round
• Institute for Fiscal Studies – “Chancellor ends austerity for public services – but risks breaching current fiscal rules”