Gareth Davies 8 Mar 2017 03:58pm

What the Spring Budget means for the public sector

This was not a Budget to shift the overall narrative for the funding of our public services. The big picture remains unchanged – continuing austerity with its increasingly visible impact on local services, remorseless rises in demand for health and social care from the ageing population and the unknowable future impact of Brexit

Caption: Expect continuing austerity and rising demand for health and social care.

In the absence of game-changing announcements, the headline funding news today was the additional £2bn over the next three years for social care. The chancellor was criticised last November for failing to mention social care at all, so the sector will be relieved to see today’s tangible recognition of the extreme pressure faced by local authorities unable to afford to meet the demand for this essential service, with its knock-on impact on hospital capacity. Most have already decided to make full use of the 3% council tax uplift for social care funding, but have pointed out that simply paying for the national living wage for care staff soaks up that extra income and more.

Of longer term significance is today’s announcement of a Green Paper on the future funding of social care. A sustainable solution to this question has been sorely needed for a long time so this may well turn out to be the most important item in the chancellor’s red box today. One possible approach was ruled out today – the tax on estates floated by Labour before the 2010 election.

The other funding announcements were smaller scale and largely expected – additional funding to smooth the implementation of more efficient NHS provision (as set out in local Sustainability and Transformation Plans); and more money for new school places, skewed towards free schools and expanded selective schools.

More news, analysis, reaction and comment from the Spring Budget

As always with Budgets, it’s as interesting to note what wasn’t mentioned as what was. Mental health services didn’t make an appearance despite having been identified as a government priority. Brexit loomed over the whole speech but not by name.

Social care aside, local government did not have high expectations of this Budget but will have been unnerved in the run up to today by the vocal lobbying against the impact of the business rate revaluation. In the increasingly devolved local finance system, councils’ financial viability depends on their ability to grow their local tax base, including business rates. They will be keen to study the details of the additional reliefs for some businesses announced today to assess their impact on future local business rate income.

The macro picture for the public finances has improved slightly, with borrowing in 2016/17 expected to be £16.4bn less than previously forecast but still a hefty £51.7bn (2.6% of GDP). The chancellor set out a trajectory of gradually reducing annual deficits for the next few years, confirming the tight spending environment for public services as we head out of the EU.

Gareth Davies, partner and head of public services at Mazars