How the 2016 Budget affects the public sector

  • The headline announcements from the 2016 Budget included a £50m Pothole Action Fund for England and £60m for rural and coastal community-led housing developments
  • Chancellor George Osborne also announced the government will need to cut public spending by a further £3.5bn by 2020
  • We examine what the Budget means for public and voluntary sector organisations

In the wake of new cuts, the challenge for local authorities will be to prepare for, and mitigate, any new risks that emerge from the changing delivery of services.”
Andrew Jepp, Head of Public Sector, Zurich Municipal

Chancellor George Osborne’s 2016 Budget included some eye-catching announcements – and the promise of billions of pounds worth of cuts ahead.

One of the headline announcements – a proposed levy on sugar in soft drinks – could have wide-ranging implications for health and education.

The NHS currently spends over £5bn on obesity-related costs and the Government will be hoping this figure starts to fall after the sugar levy is introduced in 2018. The levy is expected to raise £520m in its first year, which will be spent on primary school sports programmes.

All state schools to be academies by 2022

One of the Chancellor’s other key announcements was that all state schools will either have become academies – or have plans in place to do so – by 2022, bringing to an end the role of local authorities in running them.

Mr Osborne pitched his academies announcement as part of a wider “devolution revolution”, which will also see a number of local authorities given new or extended powers.

In addition, £285m will be made available to allow a quarter of secondary schools to stay open after 3.30pm for sport and other activities.

Budget plans for local government and charities

Budget announcements affecting local governments include new mayoral devolution deals for the West of England, East Anglia and Greater Lincolnshire, and extended devolution deals for Greater Manchester and Liverpool City.

A £50m Pothole Action Fund for England in 2016-17, should also enable local authorities to fill nearly a million potholes.

For charities, there were no significant moves to encourage greater uptake of Gift Aid, as many had urged, however a number of charities will directly benefit from a £45m Libor fines fund and a £12m Tampon Tax fund.

Measures that could affect registered providers of social housing include the deferral until April 2017 of a housing benefit cap for those living in supported social housing, and the announcement of £60m for community-led housing developments in rural and coastal communities.

Further public spending cuts ahead

In among the specific Budget announcements, Mr Osborne also announced that public spending is facing further cuts of £3.5bn by 2020.

The impact of these additional cuts, on top of austerity measures already introduced since 2010, will be particularly challenging for local authorities, according to Andrew Jepp, Head of Public Sector at Zurich Municipal. However, Jepp believes most authorities will be able to rise to the challenge.

He says: “For the last six years, spending cuts have had a huge impact on the way local authorities deliver services. Local authority leaders already know they are facing a further 6.7% funding cuts over the next four years, so today’s announcement that the government needs to cut its spending by a further £3.5bn will come as no surprise to local authorities.

“However, the public should feel reassured that councils have been ably responding to these cuts since 2010. While these cuts inevitably mean a reduction in the delivery of local services, councils have increasingly turned to new and innovative methods to drive down costs, while at the same time maintaining services at a level that the public expects.”

Jepp says local authorities will welcome the government’s push for greater devolution, including new mayoral devolution deals.

“For those already in receipt of mayoral devolution deals,” he adds, “the additional £2.86bn in funding will also be warmly received.”

Risk management more important than ever

Jepp concludes: “In the wake of new cuts, the challenge for local authorities will be to prepare for, and mitigate, any new risks that emerge from the changing delivery of services.

“With long-termism likely to dominate the approach taken by local authorities in the coming years, building in proper risk management from the start has never been so important – especially as we are likely to see little reprieve from the Chancellor in the coming years.”