Wednesday, 13 February 2019

Brexit: and no “double deal dividend” to free more money for public services

There will be less money for local government:
Amid Brexit vote chaos, the government quietly finalises council cuts - New Statesman
Futures Forum: Finalising the Local Government Finance Settlement > "finalising the government's next round of cuts to councils"

Whatever central government is offering:
Councils in England to receive over £50 million to support Brexit preparations - GOV.UK
Brokenshire reveals Brexit preparation allocations | News | Local Government Chronicle
Greenwich leader's Brexit warning after council gets £210k handout | News Shopper

Meanwhile, there are particular areas of local government responsibility which are looking vulnerable:
Brexit uncertainty is leaving the social care sector particularly exposed | PoliticsHome.com

But there might be a way to counter these trends, as suggested by David Walker, former director of public reporting at the Audit Commission: 

At least Brexit has got us talking about how public money is spent

Tue 12 Feb 2019

In a report for the Smith Institute John Tizard and I make the case for a radical overhaul of how we account for spending, before and after it is committed, and argue that it is opponents of austerity and advocates of higher spending who should be most clamorous for a tougher audit.

At least Brexit has got us talking about how public money is spent | David Walker | Society | The Guardian

But this still doesn't stop the reality of there being less cash for councils: 

UK public services face post-Brexit squeeze, forecasters warn

FEBRUARY 11, 2019
David Milliken

LONDON (Reuters) - Many British public services risk ongoing real-terms cuts for years to come, despite a softer fiscal stance from finance minister Philip Hammond, a major think tank predicted ahead of a half-yearly budget update next month.

The Institute for Fiscal Studies (IFS) expects Hammond to give more details of the money available for a multi-year review of public spending when he updates budget plans on March 13, just two weeks before Britain is due to leave the European Union.

In his annual budget in October, Hammond loosened the government’s purse-strings, giving support to the economy as it slowed ahead of Brexit. However, rising healthcare spending leaves little spare for other public services, the IFS said.

“This suggests yet more years of austerity for many public services — albeit at a much slower pace than the last nine years,” IFS research economist Ben Zaranko said.

Public services outside of health, defence and overseas aid saw budgets fall by an average of 3 percent a year in real terms after 2010, and now look set for declines of 0.4 percent a year in inflation-adjusted terms going forward, the IFS predicts.

“The (finance minister) has said that the Spending Review will take place in 2019, and that is the right moment for government to make long term funding decisions,” a spokesman from the finance ministry said in a statement. “Outside the (health service), total day to day departmental spending is now set to grow in line with inflation, and public investment will reach levels not sustained in 40 years in this parliament.”

Due largely to the global financial crisis, Britain’s budget deficit peaked at nearly 10 percent of gross domestic product in 2009/10 — one of the highest in the world at the time — but is roughly on track to drop to 1.2 percent this year.

In November, Hammond said he hoped a “double deal dividend” from successful Brexit talks would free more money for public services in the multi-year spending review due in 2019.

However, with less than two months before Brexit, Prime Minister Theresa May has failed to persuade lawmakers to back the deal she brokered with Brussels, putting Britain at risk of a disorderly exit that businesses fear would be highly damaging.

“In the short run ... government might well raise spending to support the economy, mitigate the impacts for the worst-hit sectors or areas and provide funding to departments now required to perform additional functions, notably at the border,” the IFS said.

In the long run, higher taxes or further spending cuts would be required to pay for this spending, as well as to compensate for weaker growth caused by trade restrictions, the IFS added.

Most economists, including those for the British government, estimate Brexit uncertainty has damaged the economy already and will slow growth further over the long term, even with a deal.

Last week the Bank of England estimated the costs to date at 1.5 percent of GDP — more than the forecast budget deficit for 2018/19.

During 2016’s referendum campaign, Brexit supporters including former foreign minister Boris Johnson said leaving the EU would free as much as £350 million a week to spend on public services such as healthcare.

UK public services face post-Brexit squeeze, forecasters warn | Reuters

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