An end to austerity? Not for local government.

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This article originally appeared in the Local Government Chronicle

The budget has found the money tree, but not for local economies, local public services or the climate.

We need to look at where the money goes and who has power over it. Big finance, large infrastructure companies and the existing wealth winners all win again. Just and green local economies for all remain as distant as ever.

Wider economic austerity has been abandoned – but let’s be clear, local government public service austerity remains, and so do the systemic economic issues bedevilling great swathes of this land.

The government has had a damascene conversion regarding the benefit of public sector spending and investment; Keynesianism and the multiplier are back; the magic money tree has been planted; and the days of tax and spend have returned, with projected 2.8% annual increases in public spending. This is significant – but it is no silver bullet; the entrenched problems facing our local economies and local public services remain.

Recent budgets have become political set-piece events where the chancellor has their moment in the spotlight, and this was no exception – with the repeated and coordinated chorus that the government are ‘getting it done’. Broadly absent, however, was a response to or recognition of the serious issues many local areas and local authorities face. We struggle to see how central government can ‘get it done’ on ‘levelling up’ without providing fair funding and devolving serious powers to local government.

“No reference was made by the Chancellor to any local government compensation”

Local government was alarmingly absent from the Chancellors’s remarks – mentioned directly only twice in his entire statement. This absence was demonstrated particularly starkly by the announcements surrounding business rates relief. In recent years, it has become a significant source of revenue for authorities across the country as rates retention has been rolled out and central funding reduced. Nervousness no doubt abounded in the local government community as we watched and listened because no reference was made by the Chancellor to any local government compensation.

A small paragraph in the Budget report thankfully revealed that compensation will be forthcoming – but this speaks to two larger ongoing and growing issues, which this budget did little to address. Firstly, the failure to tackle the massive and ongoing crisis of local government finance, and secondly, the outdated and overly centralised fiscal system through which local government raises revenues.

“After 10 years of austerity, the government has found the benefits of borrowing to invest…they have not found the other pieces of the puzzle”

Indeed, this reluctance to tackle the root causes emerged throughout the budget. After 10 years of austerity, the government has found the benefits of borrowing to invest, Keynesian stimulus and the advantages of the economic multiplier as public investment flows through the economy. However, they have not found the other pieces of the puzzle: problems of financial accumulation, wealth extraction and wielding progressive taxation to counteract this.  These systemic issues bedevil our local economies.

Financialisation is a key aspect of our unequal regional local economic geographies, in which financial markets and institutions have an inbuilt bias toward speedy returns on capital investment assured through the relatively safe property and land markets (often in the urban centres of our core cities). This ‘profit without producing’ bedevils our local economies and skews investment away from the relatively employment rich real economy of manufactured goods and services and the less investment ready locations. Furthermore, investors are now increasingly global, often with little or no attachment, connection or affinity to local places. This means that the return on investments is not readily recirculated by local investors into our local economies. The budget offers absolutely nothing to counteract this. Local government needs a land value tax – not endless reviews and reliefs from business rates. And local people and communities need power – over the flows of investment shaping the places they live.

“On climate emergency , this was a budget which showed awareness of the crisis…yet lacked the conviction to make the transformation”

On climate emergency too, this was a budget which showed awareness of the crisis unfolding across the world yet lacked the conviction to make the transformation so desperately required. Whilst the government provided warm words on green growth, they also announced £27bn for 4,000 miles of road, and £2.5 bn to fill potholes. Fuel duty has been frozen since 2011, at a cost of over £50bn, whilst local government budgets have been stretched to breaking points. Although there are a number of measures directly targeted at climate crisis, they fail to meet the challenge facing us – plans to plant 30,000 hectares of woodland over the next five years represent only 20% of what the Committee on Climate Change say is needed.  All of this suggests a half-hearted commitment to the local industrial transformation necessary to deliver against the government’s own zero carbon targets.

“Levelling up needs to make some hard choices – roads and rates relief alone won’t get it done, for local economies, or the climate.”

This budget is a step-change in how our economy is managed; but it does not yet appear to be a step change in who it is managed for. Levelling up needs to make some hard choices – roads and rates relief alone won’t get it done, for local economies, or the climate. The government said it will get it done – but it is unlikely to achieve its levelling up agenda if local government is largely ignored, the response to climate emergency is weak, and our local and regional economies continue to be bedevilled by the great unleveller – the forces of financial power. We must empower communities and local government if we are to have a hope of tackling climate emergency and our deeply flawed economic model.