Following today's Emergency Budget announcement, David Smith,
Director of Government and Infrastructure Advisory at Grant
Thornton UK LLP says:
"Local government spending has already been
cut by £1.2bn as part of the £6.2bn spending cuts previously
announced for the current year. Today, the Chancellor confirmed
unprotected Whitehall departments will have budgets cut on
average by 25% in real terms over the current parliament. These
reductions are 5% higher than Labour's last Budget taking cuts from
£44bn pa to £61bn pa.
"The final settlements will be confirmed on 20
October when the Spending Review is published and the detail for
local government will only be known then. The ability to mitigate
service cuts through Council Tax rises will be constrained next
year due to the proposed freeze (costing some £0.6bn in revenue
foregone) but the statement suggests that some compensation for
this may be made available by central government as an
incentive.
"Local government staff will be affected
through the proposed two year public sector pay freeze for those on
over £21k pa (with staff on less getting a flat rate £250 annual
increase), along with the public sector pensions review and
the proposal that top salaries be capped at 20 times the lowest
salary. Additionally the cuts are likely to lead to job losses with
up-front costs to local authorities (perhaps being capitalised) and
uncertain impacts on the local economy.
"There was little specifically on the
Coalition's aim of greater third sector involvement in delivery of
local services but proposals to ease the burden of VAT charges on
charities benefiting from shared services may facilitate
this.
"The announcement on restrictions to the level
of housing benefit is likely to present challenging implementation
issues for local authorities.
"Capital spending will not be cut further than
previously announced overall, but projects that contribute
significantly to economic growth will be prioritised particularly
outside London and the South East with the Regional Growth Fund and
some specific transport projects. Despite no overall cut, the
capital budget may be reallocated and consequently capital projects
delivered by local government with central government funding may
yet be impacted differently according to sector and/or
location.
"The proposal to abolish Regional Development
Agencies (RDAs) was confirmed today, although they will, in some
cases, transform into local enterprise partnerships where Local
Authorities will be able to work with the private sector. This is
also intended to facilitate greater coordination of investment in
transport, housing, regeneration and other aspects of economic
development. As part of this reform, proposals will be developed
for local authorities to support growth, including options for
business rates and Council Tax incentives to allow the fruits of
growth to be reinvested locally. Planning is intended to be driven
more by local decisions through the use of Local Development
Orders.
"Overall there are likely to be significant
challenges in prioritisation and in securing efficiencies which
will require careful financial planning. Effective coordination
across borders, across sectoral boundaries and with the private and
voluntary sectors will also be critical to successfully navigating
these challenges over the months and years ahead."
ENDS
For further information please
contact:
For further information, please
contact: Stephanie Aneto, Grant Thornton press office.
Tel: 020 7728 2940 or email: stephanie.aneto@gtuk.com
Notes to Editors:
Live Webinar
We will be running a live interactive internet
seminar (webinar) at 4.00pm on June 24, with a panel of experts who
will be commenting on what the announcement means for the UK
economy, taxes and the public sector. Viewers will be able to email
questions in to the live discussion.
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