2014 Autumn Statement: local government implications

Practical Law UK Legal Update 5-590-6405 (Approx. 6 pages)

2014 Autumn Statement: local government implications

2014 Statement

On 3 December 2014, the Chancellor of the Exchequer, George Osborne, delivered the Autumn Statement. This update analyses the key implications for local government. For an analysis of other aspects of the Autumn Statement, see Further reading.

Efficiency savings and public funding

The Statement makes it clear that the government's aim is still to reduce the deficit, partly by controlling public spending and budgets. The government committed to make £10 billion of efficiency savings on top of those already announced, which will be led by the Cabinet Office. The Statement says that the government plans to continue to implement public sector reforms in the next Parliament, "to drive out waste and inefficiency and improve outcomes". It will encourage greater integration of public services and benefits budgets.

The Chancellor confirms that local services will not face additional cuts next year, on top of those that have already been announced. The government also commits to giving local authorities multi-year budgets, to give them greater certainty when budget planning.

Housing and public sector land

The government highlights its intention to increase the supply of housing and committed to releasing public land with capacity for up to 150,000 homes between 2015 and 2020.

In order to stimulate further investment in shared ownership, the government will extend the scope of Stamp Duty Land Tax (SDLT) multiple dwellings relief, so that "lease and leaseback" arrangements with housing associations on shared ownership properties are covered by it. The government will also consult on streamlining the selling process for shared ownership properties, and says that it will work with housing associations, lenders and the regulator to identify and lift barriers to extending shared ownership.

The Statement contains details of a new housing benefit fraud and error local authority incentive scheme, which will pay financial rewards to local authorities that reduce the amount of money lost through fraud and error in housing benefit. The NAO has stated that the incentives currently in place are weak (see Legal update, NAO publishes report on housing benefit fraud and error).

A review of the role that local authorities can play in supporting overall housing supply within existing fiscal plans was also announced. The Statement says that the government welcomes the recent greater transparency over local authority housing land.

Planning

The government will continue its reforms to the planning process, to speed up planning decisions. These include:

Ensuring that the principle of development need only be established once.
Taking steps to speed up section 106 negotiations (including publishing revised guidance, consulting on a faster process for reaching agreement and improving transparency on the use of section 106 funds).
Keeping the speed of decisions on major planning applications under review, with the minimum performance threshold increasing to 50% of major decisions on time as performance continues to improve.
Publishing new data on local authorities' performance in meeting their statutory duty to process smaller planning applications within eight weeks.

The Statement also says that the government will publish at Budget 2015 proposals for consultation on making the compulsory purchase regime clearer, faster and fairer, with the aim of bringing forward more brownfield land for development.

Health

There will be £2 billion of additional funding for the frontline NHS in England in 2015-16 and the government will spend an additional £1.5 billion on frontline patient care, which will go to improving local NHS services.

Alongside this, the government is creating a £200 million transformation fund in 2015-16 to deliver the first year of the "Five Year Forward View". The fund will kick-start the work needed to develop new ways of caring for patients to improve the integration of GPs, community services and hospitals.

The Statement announces that fines collected from banks will be used to create a £1 billion fund for new primary care facilities in England, which will bring together GPs, nurses and specialists and give patients access to advanced care, such as chemotherapy and dialysis, in their local communities. There will be an additional £237 million available to the devolved administrations in 2015-16, for them to use according to their priorities.

Infrastructure and investment

The Statement sets out long-term public and private sector investment plans for infrastructure, including investment in the national and local road network and a flood defence scheme programme. The government will legislate to ensure that business contributions to flood defence schemes are tax deductible, to further encourage private sector investment in the programme.

The government will allocate a further £1 billion from the Local Growth Fund between 2016-17 and 2020-21 to support a second round of local growth deals.

Devolution

Scotland, Wales and Northern Ireland

The Scottish Government is preparing draft legislative clauses to implement the Heads of Agreement set out by the Smith Commission, which is examining what new powers should be transferred to the Scottish Parliament and reported on 27 November 2014. The Heads of Agreement state that the Scottish Government will:

Be responsible for more than 50% of its funding.
Have the power to set the rates and thresholds of income tax for Scottish taxpayers.
Be assigned the first ten percentage points of the standard rate of VAT.
Continue to have its public services block grant calculated by reference to the Barnett formula, with a deduction to reflect the Scottish Government's new tax powers.

The Statement also sets out the government's backing for greater devolution across the rest of the UK:

The Secretary of State for Wales has already announced a process to reach cross-party agreement on the Welsh devolution settlement by 1 March 2015. In the Statement, the Chancellor said that the government is also supporting devolution of non-domestic (business) rates policy to the Welsh Government, with the aim that a fully devolved regime is operational by April 2015.
The Chancellor stated that the government supports the devolution of Corporation Tax rate-setting powers to the Northern Ireland Executive.

Within England

The Statement says that the government is encouraging the development of the regions outside London, with a "northern powerhouse" being created by fostering transport, educational and technological links between northern regions. New rail franchises will be created in the region and arts projects in the north are being given government funding. The government will provide £10 million to support the expansion of the best performing academy chains to areas of the north. Following the announcement that Greater Manchester will have an elected Mayor, the government is discussing devolution proposals in other city areas.

There are also proposals to form further combined authorities and improve cooperation between local authorities in a number of urban areas. The Devolution Cabinet Committee is also considering proposals relating to decentralisation within England.

Enforcement

The Statement says that the government will work with the private sector to improve debt collection in the tax and welfare systems through the Debt Market Integrator, which makes use of a range of debt collection services across the market.

Shared services and VAT

From 1 April 2015, "non-criminal legal services" will be added to the VAT refunds scheme to facilitate legal advice being shared across public authority departments. Non-departmental public bodies will benefit from this shared service if their parent department agrees. HM Treasury has undertaken a review of government bodies eligible for VAT refunds and will publish the details early next year.

Digital services

In the Statement, the Chancellor says that the government will:

Work with local authorities and businesses on a licensing simplification programme. The expectation will be that, by 2018, every local authority in England will offer a single online application process where businesses only need register their details once, and ensure that information on licensing requirements is streamlined and accessible online. The government, through the Better Regulation Delivery Office, will monitor implementation of this, working with local authorities to remove blockages to simplification and gathering evidence of any legislative barriers to streamlining processes and reducing burdens on business.
Publish local service budgets for 2015-16 on a single web page in December 2014.
Aim to increase the digital uptake of public services online by ten percentage points in 2016. It aims to improve IT procurement, in order to secure savings from contracts that are due for renewal over the next Parliament.
Move towards a digital end-to-end criminal justice system, which uses technology more effectively. Video technology should be the default unless victims and witnesses, suspects, lawyers or police officers are required in the courtroom.

Business rates

The Statement sets out that there will be cuts and caps to business rates, and the "high street discount" for small businesses in local communities will increase from £1,000 to £1,500 from April 2015 to March 2016.

Small Business Rate Relief will also double for another year and the annual increase in business rates will continue to be capped at 2% from April 2015 to March 2016. The government will conduct a review of the future structure of business rates, to report by Budget 2016. The review will be fiscally neutral and consistent with the government's agreed financing of local authorities.

Public sector pay and pensions

The Chancellor states that reforms to public sector pensions will continue. The government will take further action to ensure the full costs of providing pensions for public service workers are met by employers and is continuing to work towards removing progression pay in the Civil Service by 2015-16. The Chancellor stated that the government will need to reform public sector pay still further in future, in order to deliver savings.

Comment

The confirmation that local authorities will not face additional cuts next year will be welcomed, as will the prospect of multi-year budgets, although the longer term threat of cuts remains. Further, the Local Government Association (LGA) points out that the cuts in funding to local authorities that have already been implemented or planned will mean that the additional £2 billion of health funding might ultimately be spent "picking up the pieces" of a failure to adequately fund the adult social care system (see LGA press release, LGA response to Autumn Statement, 3 December 2014).

It might also disappoint some that the Statement did not set out in greater detail plans for the regional devolution of powers.

Source

HM Treasury: Autumn Statement: documents (3 December 2014).

2014 Autumn Statement: local government implications | Practical Law