The ‘spending power’ that’s no power at all

Copied from Local Government Chronicle online
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The DCLG’s spending claims exemplify the culture
that has eroded public trust – 21 January, 2015 | By Tony Travers

The stand-off between central and local government over the scale of budget reductions in 2015-16 is further evidence of Department for Communities & Local Government ministers’ extraordinary world view.

Faced with cuts in cash spending every year, the department has resorted to epic creativity in its attempt to show council spending rising. How is it possible to show local authority spending going up when it is going down?

First, the government makes many of its comparisons on the basis not of the ‘spending power’ definition used for annual funding settlements but of ‘net revenue expenditure’, which helpfully includes a number of items such as ‘mandatory housing benefits’ where councils are merely acting as agents for Whitehall transfer payments. Housing benefit payments, all of which are sanctioned by central government regulations, have risen by a remarkable £3.7bn since 2009-10.

Second, ministers use a definition of spending which excludes some local/central service transfers but includes others. Schools’ funding is carefully removed from comparisons because the move of institutions into academy status reduces annual council spending.

On the other hand public health, which was passed to local government in 2013, is added in because it creates a helpful £2.5bn step-up in expenditure.

Treasury-sanctioned housing benefit cost increases and public health have, together, added £6.2bn to ‘council spending’ since 2009-10. And, bingo, this juicy sum just outweighs the cuts councils have had to make to the budgets they directly control.

Latterly, it has been decided to add part of the better care fund (worth £3.8bn) into council spending power for 2015-16, even though the money is also counted as NHS expenditure. This spectacular distortion is the root of the ‘1.8% vs 6% cuts’ debate which surrounded the recent local government spending settlement.

Using this method of boosting council spending, it would be possible notionally to add all health resources into council spending without reducing the NHS budget line by a penny.

Reason is dying. But it would be naïve of national politicians to imagine the creativity and double-counting explored above will disguise the true impacts of what has happened. Treating the electorate in this way is one of the destructive roots of the decline in trust in Westminster politics.

Tony Travers, director, Greater London Group, London School of Economics

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