Update on Autumn Statement/Comprehensive Spending Review

Update-on-Autumn-Statement/Comprehensive-Spending-Review

Our Public Affairs Manager, James Butler, takes a look at the key points in the Autumn Statement and Comprehensive Spending Review

 

 

 

Notable points

  • U-turn on proposed Tax Credit cuts; new Housing Benefit cap
  • Cabinet Office core functions cut by 26%; OCS continues, headcount reduced
  • Increased focus on Social impact Bonds
  • Big Lottery Fund not raided as feared
  • Small business rate relief extended by another year
  • Local Authorities allowed to use asset sales to support revenue budgets; Right to Contest strengthened
  • Introduce hypothecated council tax precept of up to 2% for social care
  • NHS to make efficiency savings of £22bn as expected; 25% cut in DoH’s budget. Fully fund 5 year forward plan with extra £9bn by 2020/21
  • Focus on shale and nuclear energy; no reprieve on community energy decisions
  • Other Government Departments to assist DfID

There were few shocks in the Autumn Statement. The Government’s approach to deficit reduction means that there is less money to spend, and what’s left is focused on the Conservative’s manifesto priorities. 

Of note though was the Chancellor’s U-turn on his own proposed changes to Tax Credits.

The perceived threat to the Big Lottery Fund – as rumoured in the run up to the Autumn Statement- was the dog which didn’t bark. The Chancellor said that there is to be no raid on the Fund’s support for charities.

The biggest surprise perhaps came from the Shadow Chancellor who – in jest – pulled out a copy of Chairman Mao’s Little Red Book and quoted from it, in an attempt to make a point about the Chancellor’s recent friendship with the Chinese government. Rather than highlight a valid policy point, it rather played into the Conservative’s negative portrayal of Labour’s frontbench.

For those wanting to see the full details of the announcements: https://www.gov.uk/government/publications/spending-review-and-autumn-statement-2015-documents

Business Innovation & Skills

1.219 The Spending Review and Autumn Statement further supports small businesses by extending the doubling of small business rate relief (SBRR) in England for 12 months to April 2017. Around 405,000 of the smallest businesses will continue to receive 100% relief from business rates, with around a further 200,000 benefiting from tapering relief.  The government is undertaking a review of business rates. The review will be fiscally neutral and will report at Budget 2016.

3.13 Enterprise Zones – The government will expand the Enterprise Zone programme in England with the announcement of 18 new sites across the country and the extension of 8 sites on the current programme.

The conclusion of the review of business rates will be announced at the Budget in March next year. We have made the point about the unfair way that business rates often affect social enterprises. In the meantime, the Government will extend small business rate relief. Government will increase the number of enterprise zones, and increase a number of current ones.

Cabinet Office

2.174 The Office for Civil Society will continue to provide a range of support to the UK’s third sector, but it will reduce its headcount and widen the availability of Social Impact Bonds

2.168   …expanding support for Social Impact Bonds, providing £80 million of the £105 million total across government over the Parliament, to uplift funding for locally designed schemes, tackling issues such as youth unemployment

The Cabinet Office will be cut by 26%. This is one of the larger department cuts over the course of the Parliament.

Social Impact Bonds, particularly those aimed at youth unemployment, and the National Citizen Service remain priorities for the Department. As we have said in our news release, the Government’s enthusiasm for SIBs is yet to be matched by evidence of their value. It’s early days.

There was no mention of support for mutuals, and disappointingly no mention of how the Government aims to fulfil its manifesto to make it easier for making for people to start a social enterprise.

Energy

3.23 Venture capital schemes: changes to eligible investments – The government announced at Report stage of Finance (No. 2) Act 2015 changes to the excluded activities of the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT) and Seed Enterprise Investment Scheme (SEIS). With effect from 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities. In addition, these activities will not be eligible for Social Investment Tax Relief (SITR) when SITR is enlarged. The government will exclude all remaining energy generation activities from the schemes from 6 April 2016, as well as from the enlarged SITR. The government will also introduce increased flexibility for replacement capital within EIS and VCT, subject to state aids approval. (Finance Bill 2016).

The Government confirmed its commitment to end SITR for most community energy schemes, though Secretary of State for the Department of Energy and Climate Change Amber Rudd recently announced that she will look at how best to support the renewables sector.

The Chancellor promised that “support for low-carbon electricity and renewables will more than double” – this appears to refer to the domestic energy innovation programme, not support renewable energy as such.

Government continues to have faith, and invest in, nuclear and shale. The government will establish a Shale Wealth Fund from shale gas revenues which will see up to 10% of the tax revenues from shale gas spent in local areas.

Health and Social Care

1.97 The Spending Review confirms that the NHS will receive £10 billion more in real terms by 2020-21 than in 2014-15, with £6 billion available by the first year of the Spending Review so that the government fully funds the NHS’s own Five Year Forward View.

1.99 …investing an additional £600 million in mental health services

1.100 The Spending Review reforms the funding system for health students by replacing grants with student loans and abolishing the cap on the number of student places for nursing, midwifery and allied health subjects

1.107 The Spending Review creates a social care precept to give local authorities who are responsible for social care the ability to raise new funding to spend exclusively on adult social care

1.104 The government will make savings in local authority public health spending. The government will also consult on options to fully fund local authorities’ public health spending from their retained business rates receipts, as part of the move towards 100% business rate retention. The ringfence on public health spending will be maintained in 2016-17 and 2017-18

The NHS took centre stage of the Autumn Statement. On top of additional spending in the shorter term, the Chancellor is anticipating £22bn efficiency savings over the course of the Parliament in order to meet his expectation that the Five Year Forward Plan is fully funded. The Department of Health will be cut by 26% over this Parliament.

Local councils will be given the power to raise a social care precept to spend on adult social care. This is likely to be almost universally adopted by cash strapped councils, though is unlikely to come close to helping councils meet demand.

Heavily trailed in the press, the Government introduces student loans for nursing, midwifery and the like. It is hoped that by removing a cap on places and numbers, Government will increase the supply of student nurses coming through the system. Time will tell whether or not it achieves what it sets out to do. What it undoubtedly means is student nurses entering the system will have more debt than they currently have.

International Development

1.88 DFID will remain the UK’s primary channel for aid, but to respond to the changing world, more aid will be administered by other government departments, drawing on their complementary skills.

1.89 The government will use ODA to promote economic reform in the developing world. The Spending Review will create a new cross-government Prosperity Fund worth £1.3 billion over the next 5 years, to support global growth, trade, stability and reduce poverty in emerging and developing economies, which will also open up new markets and opportunities to the UK.

A healthy acknowledgement that DFID doesn’t have all the skills, or an admission that that DfID hasn’t got the capacity to administer its protected budget, or perhaps a crafty means of ensuring the Government fulfils its international commitments while shifting resources away from DfID to other more hard pressed departments? Or a bit of all three? The implications of the announcement are not immediately clear, but we know that there is an appetite in Government to explore how social enterprise models might be part of the solution to help deliver sustainable growth in developing countries.

Not part of the Autumn Statement, but nevertheless welcome, Nick Hurd MP returns to the Government as a junior minister in DfID.

Local Government

3.12 ..strengthen Right to Contest for local authority land and property

….give local authorities flexibility to spend capital receipts (excluding Right to Buy receipts) from asset sales on the revenue costs of reform projects, subject to conditions that will be set out alongside the local government settlement in December

1.238 By the end of the Parliament local government will retain 100% of business rate revenues to fund local services, giving them control of £13 billion of additional local tax revenues, and £26 billion in total business rate revenues. The Uniform Business Rate will be abolished and any local area will be able to cut business rates as much as they like, to win new jobs and generate wealth. Fixing the current broken system of financing local government will strengthen incentives to boost growth, help attract business and create jobs.

Devolution continues, giving more power and responsibility over business rates to local authorities.

In addition to the social care precept, greater flexibility to dispose of assets will be welcome by local authorities. When combined with an extension of the Right to Contest (which currently applies to central government land and allows people to challenge how effectively land is being used) and the Right to Buy this could be exciting news for community groups wanting to purchase an asset. However, the danger is that rather than maximising wider, long-term social value from the disposal, councils will be more interested in maximising narrow, short-term financial value in order to balance their books.

Department for Work and Pensions

Significantly, a new Work and Health Programme will replace the Work Programme and Work Choice which “will provide specialist support for the long-term unemployed and claimants with health conditions and disabilities”.

Given the problems with the work programme, this is an area we will be looking at closely.