Announcing the publication of my new report, Building Freedom.
In next week’s Budget, the Chancellor is expected to set out the details of the removal of the HRA borrowing cap. He will be looking ahead to next year’s Spending Review, in which he will want to pull out all the stops to boost growth across the whole country, in case of short-term (or even long-term) economic shocks caused by Brexit. He will also want to demonstrate that the UK is emerging from a decade of austerity. He will want to show that the Government is serious about tackling the housing crisis by making the lifting of the HRA cap permanent. And he will want to achieve all this without letting the deficit grow again.
The Spending Review should allow investment which will bring benefits in the long term. It should put citizens and communities at the centre and build a country that works for everyone, ready for life after Brexit. The proposals in this report will help the Chancellor to achieve just that.
This report looks in depth at the way the Government treats local authority financing as its own in Budgets and Spending Reviews. It shows the problems this has caused for councils across the country wishing to invest in housing and infrastructure and grow local economies. It looks at other countries’ measures of deficit and debt, such as Denmark, Sweden and Canada, but also the wider context for these, such as the presentation of fiscal documents and the country’s local government finance system.
It recommends that:
- Spending Review and Budget documents should be reformed to reflect the financial autonomy of local government:
- These documents should focus primarily on the finances of central government and bodies which are answerable to it (such as the NHS and Non-Departmental Public Bodies);
- Corresponding statistics should be presented for expenditure, income, in-year balance and debt – excluding local government;
- Financial and fiscal data estimates or projections relating to local government should only be included in these documents in a separate section providing a reconciliation for the whole public sector. These should be agreed through consultation with representatives of local government;
- The Government should immediately set up a panel of experts, as described in this report, to consult on the details of these changes. As part of their deliberations, they should consider the presentation of public finances in other countries. The details should be agreed in time to implement these changes in Spending Review 2019;
- In future, the Government should not impose any constraints on borrowing or investment on local government other than those contained within the prudential system. Neither should the Government reduce revenue funding for local government as a “cost” of greater borrowing or investment by local authorities.
Revised on 28/10/2018 to include text on Housing Infrastructure Fund, further detail and clarification on TIF, and reformatted references