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Budget 2017

Budget 2017

Our response to what the Chancellor’s first, and last, Spring Budget means for our key policy areas

 

Social Care

The Government has set aside £2 billion over the next three years for councils to tackle difficulties in the social care sector, with the aim of accommodating increased demand for care services, supporting care providers, and relieving pressures on the NHS. This funding comes with the expectation that councils, social care providers and local NHS leaders will work together to ensure it is spent as effectively as possible – a message backed up by confirmation of a further £325 million to implement Sustainability and Transformation Plans. This focus on promoting local dialogue, integrating services, and building capacity in community-based care, will be key in the necessary long-term transformation of our health service towards one rooted in the management of chronic rather than short-term illness, to reflect the changing nature of the UK’s healthcare needs

Policy & Projects Manager Duncan Sim said: “The Chancellor’s cash injection for social care will come as a considerable relief to the sector, especially given the Government’s controversial decision not to explicitly address this issue in the Autumn Statement last year. The fact that this money is frontloaded, with half being made available in the coming financial year, is also to be welcomed, given that a significant proportion of the much-vaunted Better Care Fund investment will not be available to councils until nearer the end of the Parliament. Ultimately though, this new money can be seen only as a stopgap in the wider context of the ongoing need to build up community-based services to provide for the ageing population. The Green Paper on social care financing expected later this year will have to consider carefully how existing resources can best be deployed – including if necessary redistributing funds from hospital budgets to invest in social care, as ResPublica proposed in our 2016 report Care after Cure.”

Education

ResPublica welcomes the Chancellor’s announcements to further invest in education with:

  • £320 million to help fund up to 140 schools, including independent-led, faith, selective, university-led and specialist maths schools.
  • A further £216 million investment in school maintenance.
  • Expansion of free school transport for pupils who receive Free School Meals and attend to attend the nearest selective school in their area.

There are, however, a number of circles to be squared in ensuring that every child has the opportunity of a place at a good school, whatever their background. The announcement that new free schools will be located where they are most needed, following a rigorous assessment of local factors, is welcome. But there are challenges in ensuring that the expansion of faith schools can also address the problems of segregation in our most isolated and deprived communities, as identified in the Casey Review. It is right that pupils from low income families should not be disadvantaged in attending selective schools by the costs of public transport. This does however raise the dilemma of restricting grammar entry to those who live nearby (so continuing ‘selection by house price’) and on the other hand creating a situation where the best children in any area leave for better schools elsewhere; thereby inhibiting the positive effects of good schools in local communities.

Mark Morrin, Principal Research Consultant, said: “The attainment gap between disadvantaged and other pupils is now narrowing year on year, but there are still 1 million pupils in underperforming schools, largely in our most deprived communities. The Chancellor has rightly stated that he ‘will not saddle our children with ever-increasing debt’, but he must also recognise the danger that our most disadvantaged pupils will be saddled with the consequences of under-investment.”

Devolution, cities and regions

As expected, the Budget did not contain significant changes for cities and regions, instead mainly highlighting further reviews or clarifying previous announcements.

On business rates, as the majority of controversial rises are in London and the South East, the formula to allocate the £300m discretionary transition funding is likely to send most of  it there. The Government will, no doubt, hope that by making the fund discretionary, political heat for controversial rises will be transferred to local councils. Business rates do not currently capture much value from the high-productivity firms in smaller, city centres premises that the Government hopes to encourage. They also incentivise sprawling out-of-town development, and disadvantage ‘bricks and mortar’ businesses compared with online ones.

Senior Policy and Projects Officer Tom Follett, said: “Intention to deliver more frequent revaluations is likely to fall victim to exactly the same forces that delayed the current revaluation – short-term political gain. The wider problems with business rates continue to mount. The Government has yet to seriously get to grips with what a potential replacement, such as a Land Value Tax, would look like in practice”

On infrastructure, transport and development, it is positive that the London devolution agreement includes a review of funding infrastructure through auctioning the right to develop land adjacent to new stations. The lessons from this need to be quickly transferred to other cities in the North. It is also vital that the £690m announced from the National Productivity Investment Fund for local authorities to tackle congestion aligns with broader goals and supports investment in rapid transit where appropriate, not merely space for more traffic.

Tom Follett said: “The auctioning of development rights around new stations in the London devolution agreement could mean more money for investment in transport. The huge possible gains in property values around Crossrail 2, for example, would no longer go to homeowners and businesspeople who own their premises. The Government also needs to consider how the £690m urban transport funding will support tackling air pollution in the cities where it is spent, prioritising sustainable travel and low-emission vehicles.”

Social Reform

This Budget and the economic measures it contained were, according to the Chancellor, not an end in themselves, but instead a means to the creation of an economy which supports ordinary working families, and to address the great social challenges the Prime Minister has spoken of since taking office. The Chancellor listed a series of areas – including housing affordability, skills and qualifications, and savings and pensions – where there is popular concern that the next generation will not share the same opportunities their parents have enjoyed. Yet announcements and strategies on these vital questions have arguably been fragmented and disconnected, and the holistic vision which was promised in the Prime Minister’s speech at the start of the year remains unrealised as yet. The Budget offered an opportunity to rectify this shortcoming, but concentrated largely on education to the exclusion of detail in other areas the Government will need to consider if it is to realise its broader aspirations.

Duncan Sim said: “Since setting out her vision for the ‘shared society’ in January, the Prime Minister’s social reform agenda has progressed in fits and starts. We have seen details emerge on individual issues, such as mental health and secondary education, but the demands of preparing for Brexit have crowded out the space needed to act upon the narrative she outlined. In this Budget, the Government has gambled on the power of education to deliver on its vision, with the aim of opening opportunity to every child from every background to break the geographic and intergenerational patterns of disadvantage we see in the UK at present. It is clear that education is viewed as the thread connecting otherwise isolated interventions in this space; we welcome and echo this belief.

“Yet while it is critical that individuals receive the best possible start in life, this on its own will not be sufficient to reverse the belief in many communities that they are cut off from the wider country’s prosperity, and excluded from the vision for its future advanced by those in power. Government must be clear in its long-term plan to tackle deep-rooted issues such as asset concentration which hold back the potential for a shared and inclusive politics between a citizenry of equals. In particular, more consideration must be given to the importance of place, both in terms of the locality as a political decision-making forum, but also as an important driver of cultural and social outcomes in itself.”

Business and industrial measures

The Chancellor was seeking to signal a confident future and steady ship, basking a little in the economic figures and seeking to avoid plucking rabbits out of the proverbial hat which could backfire. However, while the Chancellor rightly highlighted many of the UK’s challenges – low skills to poor infrastructure to name some – there was a hole. Where was the overall plan?

The Government’s commitment to an industrial strategy was warmly welcomed (including by ResPublica) when it was trailed in the Autumn Statement and published in January, yet it warranted no mention in the first government set piece since publication.

Commitments to tackle an acute skills gap by streamlining 13,000 vocational qualifications into 15 technical T-Levels, and more training hours and work placements are welcome, as is £250 million for PhD places in STEM disciplines. But, if they are not clearly embedded in a strategic approach in tone and reality, then there is the risk of perpetuating the UK’s ongoing failings of disjointed industrial policy. Given the Industrial Strategy framework has been laid out why not use it, especially as business bodies like the CBI have called for more clarity?

Four important areas will shape the degree of success of the industrial strategy and show it is more than a temporary story: (1) Is political consensus, continuity and certainty being built? (2) Is there coherence across departments and alignment of policy? (3) Is the direction of travel being maintained which enables strong sector approaches and supports the economic role of localities? (4) Are institutions being built and maintained that support these above. We didn’t hear much from the Chancellor on these.

The Budget did nod to the changing nature of employment and business forms with the national insurance changes. There was more funding for devolution although the goal should be for areas to have real economic agency rather than rely on annual largess. The boiling cauldron of business rates was sought to be cooled with supportive measures and pledges to apply taxation to the digital economy. However, more fundamental rates reform is due as is a credible focus on making life easier for business.

Too often corporation tax is seen as a proxy for ‘pro-business’ measures, despite the fact that small companies don’t pay it and large companies avoid it. There is much less emphasis on pro-business processes – the complexity, uncertainty and length of time for business rate revaluations is a case in point. We need institutions and processes that work. There are opportunities for more fundamental reforms to address the deep-seated challenges. While for example T-Levels are much needed there has been much less on changing incentives around business models to support the social outcomes the Prime Minister seeks (as a recent ResPublica event focused on).

The Government has outlined many reviews on specific areas and the Chancellor highlighted some more to follow the Budget. We await the results of those, and the conclusion of the Industrial Strategy Green Paper consultation, the expected White Paper clarifying and amplifying the direction of travel, and then Autumn Budget cementing the financial pillars. Much rests on the Autumn.

Jake Sumner, Senior Associate Industrial Strategy, said:The last Spring Budget seeks to be a steady account of the away ahead but it feels something of the phoney war and a more technical financial statement, rather than setting out a new stall, with the Autumn’s Budget the likely one to watch, coming as it does after the triggering of Article 50. In the Autumn, we are also awaiting much more flesh on the bones of the cornerstone economic and business framework, the industrial strategy, that was somewhat absent in this Budget. One might think the flagship economic frame might be mentioned by the Chancellor.

“Initial views suggest it was a ‘quiet Budget’ but there will be considerable noise in the Autumn if the Budget does not help underpin more clearly and in a more coordinated way how the UK will overcome the deep-seated challenges from poor infrastructure to low skills, a lack of business investment to regional economic disparities, trade imbalances to Brexit uncertainty, many of which the Chancellor identified. There is an opportunity to chart much need reform in these areas the Government can and should grasp.”

Thomas Nguyen, Policy and Projects Officer for Industrial Strategy said: “While funding pledges to boost science and innovation and to incentivise private sector investment are welcome, they cannot be substitute for addressing underlying weaknesses in the economy. If we are to create the right conditions, and realise the potential for industry to drive up productivity and generate more even and inclusive place-based growth across the county, one-off funding pledges alone, as we saw today, are unlikely to achieve the outcomes the Government desires. Building better local transport infrastructure and plugging sector-specific skills gaps for instance must reflect the diverse needs of the UK’s regions and industries. To enable this, Government must adopt a proactive and strategically joined-up approach across Whitehall that connects the Industrial Strategy overlap between DfE, DfT. DCLG, DExEU, and BEIS and between regions and sectors in a more meaningful way.”  

 

 

 

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