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| Dear chancellor, it's time to end public spending austerity | Dear chancellor, it's time to end public spending austerity |
| (2 months later) | |
| Philip Hammond has little room for manoeuvre on public services, but needs to act on housing and health, as well as letting councils know where they stand | |
| Gareth Davies | |
| Mon 20 Nov 2017 08.13 GMT | |
| Last modified on Mon 20 Nov 2017 08.14 GMT | |
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| By early afternoon on 22 November, we will know the chancellor’s answers for next year to the two eternal questions of public spending – how big is the pie and which services are getting bigger slices? | By early afternoon on 22 November, we will know the chancellor’s answers for next year to the two eternal questions of public spending – how big is the pie and which services are getting bigger slices? |
| On the first question, the evidence from the general election in June and more recent surveys of public opinion suggests that people are noticing the impact of the long squeeze on public spending on the services they and their families use. Public support for further spending cuts in frontline services has reduced even if this means delaying the planned elimination of the annual deficit. | On the first question, the evidence from the general election in June and more recent surveys of public opinion suggests that people are noticing the impact of the long squeeze on public spending on the services they and their families use. Public support for further spending cuts in frontline services has reduced even if this means delaying the planned elimination of the annual deficit. |
| But the chancellor’s ability to respond to this apparent change in the political weather is heavily constrained. The positive impact of the better than expected borrowing figures since the March budget is likely to be overwhelmed by the expected downgrade in the Office of Budget Responsibility’s estimate of productivity growth. | But the chancellor’s ability to respond to this apparent change in the political weather is heavily constrained. The positive impact of the better than expected borrowing figures since the March budget is likely to be overwhelmed by the expected downgrade in the Office of Budget Responsibility’s estimate of productivity growth. |
| If the target to reduce the deficit to below 2% of GDP by 2020-21 remains in place, significant increases in spending will need to be matched by tax increases. | If the target to reduce the deficit to below 2% of GDP by 2020-21 remains in place, significant increases in spending will need to be matched by tax increases. |
| Traditionally, the first budget after an election is seen as the opportunity to get unpalatable tax rises out of the way but scope for that approach in this parliament is limited by the politics of minority government and the striking fact that tax receipts as a percentage of national income are already forecast to reach their highest level in 35 years by 2021. | Traditionally, the first budget after an election is seen as the opportunity to get unpalatable tax rises out of the way but scope for that approach in this parliament is limited by the politics of minority government and the striking fact that tax receipts as a percentage of national income are already forecast to reach their highest level in 35 years by 2021. |
| So if the pie is likely to be only marginally larger, what are the funding pressures facing individual public services? | So if the pie is likely to be only marginally larger, what are the funding pressures facing individual public services? |
| The government has already acknowledged the need to relax its cap on public sector pay rises for some services, identifying prisons and the NHS as priorities. The remorseless rise in demand for health and social care services is showing in lengthening waiting times for treatment and delays in discharging patients to appropriate care settings. For health and social care, long term sustainability will require fundamental system change, but in the meantime it would be a surprise not to see a further cash injection. | The government has already acknowledged the need to relax its cap on public sector pay rises for some services, identifying prisons and the NHS as priorities. The remorseless rise in demand for health and social care services is showing in lengthening waiting times for treatment and delays in discharging patients to appropriate care settings. For health and social care, long term sustainability will require fundamental system change, but in the meantime it would be a surprise not to see a further cash injection. |
| It will also be a surprise if measures to address housing supply aren’t prominent. The government will have been pleased this week to see housing association debt reclassified as private rather than public, reducing government borrowing by an estimated £66bn, but the under-supply of affordable housing remains critical. | It will also be a surprise if measures to address housing supply aren’t prominent. The government will have been pleased this week to see housing association debt reclassified as private rather than public, reducing government borrowing by an estimated £66bn, but the under-supply of affordable housing remains critical. |
| Local government will also be hoping for clarity on the revised timetable for allowing councils to retain 100% of their business rate income as well as on the arrangements for protecting those areas previously reliant on redistribution from the national pool. An unlikely headline grabber perhaps, but this is a vital factor in councils’ financial plans. Having borne some of the largest percentage cuts since 2010, many councils have made substantial strides towards financial self-reliance and need to know when the new business rate regime will kick in. | Local government will also be hoping for clarity on the revised timetable for allowing councils to retain 100% of their business rate income as well as on the arrangements for protecting those areas previously reliant on redistribution from the national pool. An unlikely headline grabber perhaps, but this is a vital factor in councils’ financial plans. Having borne some of the largest percentage cuts since 2010, many councils have made substantial strides towards financial self-reliance and need to know when the new business rate regime will kick in. |
| It’s hard to see how the chancellor will be able to address even this short list of strong claims for higher spending without relaxing one or more of his macro targets. | It’s hard to see how the chancellor will be able to address even this short list of strong claims for higher spending without relaxing one or more of his macro targets. |
| Gareth Davies is partner and head of public services at Mazars LLP | Gareth Davies is partner and head of public services at Mazars LLP |
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