Andrew Jepp, Managing Director, Zurich Municipal, comments on the Autumn Budget
Insurance Premium Tax
The Chancellor’s decision to freeze Insurance Premium Tax (IPT) is welcome. An increase in this ‘tax on responsibility’ would have put additional pressures on local authority budgets already stretched by years of spending cuts. We are calling on the Government to take this decision forward by committing to a review of IPT to give responsible citizens and public services paying premiums greater certainty.
While Philip Hammond’s decision to tie business rates to the Consumer Price Index will be welcomed by the business community, we’re calling on the Government to ensure that already cash-strapped local authorities do not lose out in return.
In recent years, local councils have increasingly relied on the retention of business rates to invest in local services. While today’s announcement is good news for consumers, we urge the Government not to lose sight of the local authority funding streams. Additionally, the decision to pilot 100% business rate retention in London for 2018-19, announced by the Chancellor today, will only compound the equalisation challenge local authorities are already facing unless the process is transparent and fair which needs urgent consideration.
Local govt finance
Whilst additional funding for councils on projects such as Clean Air Funds, the new Transforming Cities Fund, and the move to allow local authorities to increase the council tax premium on empty properties from 50% to 100%, are all welcome, local authorities still face a very challenging funding landscape.
Our report ‘Why are we here’, launched earlier this month, gave a glimpse of life on the frontline of local government featuring interviews with 22 council chiefs across England and Scotland. In the face of continued austerity like we’ve seen today, local councils are increasingly turning to alternative income streams to plug the funding gap.
While risk-taking is inevitable in this uncertain and difficult climate, it’s essential that local authorities ensure that they have robust plans in place to minimise and mitigate the risks and threats that will materialise in the years ahead.
We welcome the Chancellor’s announcement of an additional £28m for community support to victims of the Grenfell Tower disaster.
Social care funding
Councils will be concerned to see that the Government has not invested further in adult social care and children’s services, despite campaigning by the LGA. The UK’s social care system needs urgent additional funding with the LGA estimating that by 2020 almost 60p in every £1 of council tax will have to go towards care for vulnerable children and adults.
Philip Hammond had made clear his intention to use this Budget to try and fix Britain’s broken housing market. Local government will welcome measures to make it easier for first time buyers to get on the housing ladder.
However, central government must allow local authorities greater freedom to replenish social housing stock. We welcome the Chancellor’s announcement that he will lift Housing Revenue Account borrowing caps for councils in areas of high affordability pressure, so they can build more council homes. We will continue to monitor the impact of this change on our customers.
Overall, Zurich Municipal welcomes the Chancellor’s ambitions as set out today but feels this Budget will be viewed as a missed opportunity, certainly for local government finance. Recent revisions down of the national growth rate and a rise in the base rate of interest only underline what council chiefs already know. There are some tough decisions ahead for local authorities as they seek to answer the question: why are we here?