Apr 25th, 16:18
Blog 25th April 2019
In this week’s blog, I refer to: The Institute for Public Policy Research (IPPR); the Organisation for Economic Co-operation & Development (OECD); United Kingdom Government; Brexit; Spending Review; Philip Hammond; Treasury Select Committee; Local Government Association (LGA); Homelessness; Local Government Chronicle; Public Finance; Scottish Parliament; Scottish Housing Regulator; Seminars & Training.
The Institute for Public Policy Research has published a report that makes interesting comparisons between the public finances in Britain and other European countries using data supplied by the Organisation for Economic Co-operation and Development.
The analysis found that United Kingdom government spending amounts to 40.8% of Gross Domestic Product but the average stands at 48.9% for similar European countries. The comparator countries include Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Spain and Sweden.
Member States of the European Union - on average they spend more on public services than the United Kingdom, especially on social protection including pensions
The biggest difference in spending was in social protection that accounts for 15.2% of Gross Domestic Product in Britain but that averaged 20.5% in the other countries. This is one of the reasons why provision for pensions is relatively poor in the Britain. The United Kingdom government also spends significantly less on Education; Recreation, Culture & Religion; Economic Affairs and Other Public Services. In contrast the United Kingdom government spends more than the other countries on Defence, Public Order and Safety.
Harry Quilter-Pinner, senior research fellow at the Institute for Public Policy Research, said:
“We must become ‘more European’. Our neighbours have consistently invested more in welfare and public services and consistently deliver better social outcomes than us. We need a fundamental shift in our approach to investment in this country to deliver high quality social and child care, a life-long education system, 21st century healthcare and a properly funded benefits system.”
Aligning the United Kingdom’s public spending with similar countries would see total spend increase by £2,500 per person annually; and spending on health, education and social security would increase by £1,800 per person annually.
The Institute for Public Policy Research suggested spending increases could be supported by raising taxation levels to similar level seen in these countries. It said that the countries typically raise more through corporate taxation and income taxation – including employee contributions to social security.
However, Britain appears to be heading in the opposite direction – leaving the European Union in favour of an economic model more closely aligned with the United States where the public sector has a minimal role.
In his Spring statement, Philip Hammond, the Chancellor of the Exchequer, announced that the Spending Review would be completed in the Summer of 2019. However, when he appeared before the Treasury select committee yesterday, he appeared to suggest that this may be delayed because of ‘Brexit’, saying that:
“We will keep an open mind about how the process should unfold as we go through the next few months… If we are going to do a full three-year Spending Review then we need to formally start the process before the summer recess, carry it on through summer and bring it to a conclusion around the time of the autumn budget… My own view… is that if we have not clearly found the solution to the Brexit conundrum and we are on our way to delivering an outcome it probably would not be appropriate to go ahead with a three-year Spending Review.”
When challenged about the Local Government Association’s analysis that showed the funding gap for local government in England reaching £8billion by 2025, he said that:
“I do accept there is a funding gap, but I don’t accept the numbers you just quoted from the Local Government Association… We will be – in the course of the Spending Review – setting forward budgets for local authorities… Obviously we are looking at local authority funding, and it will be one of the key areas that we need to look at.”
I think we can expect a delay in the spending review and disappointment for local authorities at the result.
Meanwhile, the euphoria that surrounding the passing of the Homelessness Reduction Act is starting to fade, with the Local Government Chronicle reporting that:
“One year on from the introduction of the Homelessness Reduction Act the number of households in temporary accommodation has gone up while gatekeeping behaviour by housing officers is continuing.”
And ‘Public Finance’ reporting that:
“A £1billion drop in annual council spending on homelessness support in England should be a ‘wake-up call’ for the government.”
Councillor Farah Khanum Hussain (Labour), the Cabinet Member for Housing & Homelessness told the Housing, Communities & Local Government Select Committee on Tuesday that the £285,000 received by her council fell far short of the £2million they estimated they would need to implement the act.
It appears that, despite the legislation, the reduction in funding is preventing councils from achieving the desired outcome: to reduce and then eliminate homelessness.
I have written a briefing paper on the Homelessness Reduction Act and New Burdens Funding. To view or download your copy, please click here.
We have just launched our seminar on ‘All You Want to Know about Scottish Local Authority Housing Finance’ that will be held in Edinburgh in September 2019. This seminar is a useful introduction and overview of this important subject.
New Council Houses in North Lanarkshire
Social housing is becoming increasingly important in Scotland at a time of rising demand for affordable housing. The Scottish Parliament has passed the Housing (Scotland) Act 2014, reformed the Scottish Housing Regulator, ended the ‘Right to Buy’ and is promoting and funding an ambitious development programme. The Scottish Housing Regulator’s new approach emphasises ‘Value for Money’. The United Kingdom government is ‘reforming’ welfare with significant implications for Scottish tenants and landlords, but some welfare powers have now been devolved to Scotland.
Scottish local authorities therefore face significant challenges, not least the need to meet the Scottish Government's aspirations for development.
The session will answer the following questions:
We are also holding a seminar on ‘All You Want to Know about Scottish Housing Association Finance’ in Edinburgh in May 2019.