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Blog 22nd October

Oct 22nd 2018, 14:40

Blog 22nd October

In this week’s blog, I refer to: Budget 2018, Philip Hammond, Theresa May, Conservative Party conference, National Health Service, Brexit, Housing Borrowing Cap, Housing, Local Government, Welfare, Woking Borough Council, Sheerwater Regeneration scheme, Training and Seminars.

Philip Hammond will present his budget next Monday 29th October. In it he will announce the government’s spending, tax and borrowing plans from 2019/20 to 2022/13. It will be of even more interest than usual to those of us who are involved in public services.

At the Conservative Party conference, Theresa May announced an ‘end to austerity’. However, the budget for 2019/20 already has £4billion in planned departmental spending cuts factored in. This raises the question of what is meant by an ‘end to austerity’? Does it mean that these planned savings will still be implemented but there will be no new cuts, or does it mean that these planned savings will not be made after all? If the first, people will be entitled to think that austerity isn’t really coming to an end. If the second, the Chancellor will have to find a way of funding £4billion.

Theresa May also announced the abolition of the local authority ‘housing revenue account borrowing cap’. It is forecast that this will lead to local authorities borrowing and spending an additional £1billion a year. From the Treasury’s point of view this is all public borrowing.

Prior to the budget, ministers have announced increases in expenditure on the National Health Service (England), defence and foreign aid. These total £13billion a year by 2022/23.

And, under the Barnett formula, any increases in expenditure in England automatically result in increases in the budgets of the devolved administrations in Northern Ireland, Scotland and Wales.

So, the Chancellor’s first challenge is to find a way of funding at least £18billion of expenditure.

Every Chancellor likes to have a ‘successful’ budget. This usually means making announcements to please their supporters and the public around increased expenditure on popular projects or reduced taxation. However, if the Chancellor announces anything that involves increased expenditure or reduced taxation that would add to the budget gap.

Brexit is also casting its shadow over the budget. Forecasts of its economic impact vary, but the government’s own forecasts, supported by most economists, are that economic growth will slow and tax revenues will fall.

HM Treasury - where the 2019 Budget is being prepared

So, what are the options:

  • First, cut spending in unprotected budgets. There are two problems with this. First, there aren’t many budgets that government hasn’t pledged to protect or increase meaning that further cuts would have to be made to local government, police, transport and welfare – with most having to come from welfare as it is the largest of these budgets. Second, this would conflict with the ‘end to austerity’ commitment.
  • Second, increases in taxation. If £18billion was raised through income tax the standard rate would have to increase from 20% to 22%. If £18billion was raised through value added tax the standard rate would have to increase from 20% to 24%. If £18billion was raised through corporation tax the standard rate would have to increase from 19% to 26%. These would all be significant increases that would be politically difficult for a government that claims to favour low taxation.
  • Third, increased borrowing. This would conflict with the government’s commitment to reduce public borrowing.

I expect the Chancellor will opt to increase borrowing. This would enable him to fund existing commitments, avoid further significant cuts in expenditure and avoid increases in taxation. It would also provide a stimulus to the economy to counteract the depressing effects of Brexit.

He will announce the details of the abolition of the local authority housing revenue account borrowing cap. However, I don’t expect he will announce any increases in local government or welfare budgets, but I may be pleasantly surprised.

All will be revealed on Monday!

As usual, I will write a briefing paper on the implications of the budget for public services.

Last week I was in Woking, where I am the Independent Tenants’ Advisor for the Sheerwater Regeneration scheme. I was at the Parkview Community Centre on the estate where I met with tenants who wanted to discuss the scheme.

Parkview Community Centre at Sheerwater, Woking

Plans to transform Sheerwater were approved by Woking Borough Council on Thursday 6th April 2017. By using the existing sense of community, the regeneration provides an exciting opportunity to create a thriving, balanced and sustainable community for the future that meets the housing needs of residents.

The regeneration will allow local people of all ages to benefit from high quality new homes, excellent leisure and retail facilities, open green spaces and improved transport links, as well as a local centre that blends social, retail, recreation and community uses.

It will also provide economic benefits for local people and businesses by offering local job opportunities and ensuring that much of the money spent on the scheme is spent with local companies.

A wide range of house types will ensure a choice of modern, spacious, energy efficient homes that are economic to maintain, and flexible enough to satisfy diverse and changing needs.

For more information about our work as Independent Tenants Advisor for Sheerwater, please click here.

Our next seminar is: ‘All You Want to Know about Local Authority Housing Finance’ and will be held in London on 6th November 2018. As usual, this seminar is proving popular, but we still have a few places available.

This seminar is designed to give an introduction and overview to this important subject and is fully up to date with all developments. It is designed for people who are not experts in housing finance, but who need to understand the basics and achieve an overview of what is going on. It is suitable for councillors, housing managers, tenant representatives, finance staff who have limited experience of local authority housing finance and others who realise that an understanding of housing finance can place them at an advantage!

The session will answer the following questions:

  • How does the Housing Revenue Account work?
  • How does the Housing General Fund work?
  • How does the Housing Capital Programme work?
  • What is going on in the world of local authority housing finance?
  • What are the Financial Opportunities and Threats for Local Authority Housing?

For more information or to make a booking, please click here.

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