WHEN it comes to his set piece performances in the House of Commons, George Osborne usually likes to wrong-foot his opponents by pulling a rabbit out of the hat. But while the Autumn Statement may have lacked any major surprises, the Chancellor - like all good magicians - still provided plenty of tricks, illusions and sleight of hand.
On the surface, the Government’s promise of a “devolution revolution” looks set to give local government the power to become truly self-sufficient. But if we peek behind the curtain, we can see very little substance behind these claims. In reality, local authorities will remain restrained by central control while having increasingly less cash to provide vital services to the community.
A classic example of Osborne’s sleight of hand was his announcement that councils with the responsibility for adult social care will be permitted to raise council tax by 2% to pay for these services. To the gullible audience, this might appear to be a grand gesture to give fiscal power to council. But if we examine this closer we see a strictly capped and limited increase which is tightly ring-fenced for spending in one specific area. A far cry from a full-blown “revolution”. Having spoken to council officers, I understand the vast majority of the money raised via the 2% increase will be used to cover the rising cost of paying staff the National Living Wage that Osborne unveiled in this year’s budget. Like many illusionists, Osborne offers a distraction with one hand while taking away with the other.
The Government’s other blockbuster announcement, that councils will retain 100% of business rates collected by the end of the Parliament, was trailed heavily ahead of the Autumn Statement. This will be accompanied by the scrapping of the uniform business rates and giving councils the power to cut rates in order to compete with neighbouring authorities. Again, smoke and mirrors have been used to present the policy as the great emancipation for local councils. But if we are to see a true “revolution”, local authorities must be trusted with the freedom to raise as well as cut business rates. This would allow councils to charge out of town mega stores more to offset discounts for town centre shops. As it stands, this policy is only a half measure.
Just a handful of areas – those with elected city-wide mayors - will be allowed to raise business rates. Even then by just 2% and only with the agreement of local business and on the condition that the cash is spent on infrastructure projects. As with the adult social care precept we have a restrictive and closely regulated “devolution” policy cunningly disguised as complete freedom.
One announcement was conspicuous by its absence was the Chancellors proposal to hand local authorities the power to relax Sunday trading restrictions for large supermarkets. You could almost hear the collective sigh of relief from council chief executives, supermarket staff and small shop owners as it became clear that Osborne had decided to leave the proposals on the shelf. The idea that extended Sunday hours would increase demands is one of the biggest myths in retail. The move would simply extend six and half days’ worth of shopping over a full week. It would create a major headache for councils who would be placed in direct competition with each other over who could deregulate opening times the quickest. This would not only rob supermarket workers of what little free time they currently get but create a maddeningly complex and inconsistent system of opening times across council areas.
I welcome Osborne’s decision on this, albeit one that was forced on him by the Scottish National Party withdrawing their support. As chairman of the All-Party Parliamentary Group for small shops I speak to many convenience store owners in Rochdale and across the UK. These businesses are often the backbone of any local community and their ability to open longer on Sundays than their larger competitors is a vital advantage.
It was not all good news for retailers, as independent high street traders were hit with news that the rate relief scheme for struggling town centre shops has been scrapped for 2016/17. With the long delayed revaluation of business rates postponed until 2017 this is a potentially fatal double blow for many small business owners. Traders now face a full financial year of paying over the odds, in some cases 20% more, as relief ends 12 months before the much needed revaluation. This will have a disproportionate impact on Northern towns like Rochdale where rateable values have been over inflated in recent years. Rochdale Council has done an excellent job helping new start-up retailers with its own rates reduction scheme, but existing traders will suffer because of this policy.
While many magicians will saw their assistants in half, Osborne the illusionist prefers to take the axe to local authority budgets. Councils may get the right to retain their business rates, but Osborne plans to significantly reduce the central Government grant at the same time. In my constituency, an already strained Rochdale Borough Council has been forced to find £140 million in savings since 2010. With a grim sense of timing, the council will discover just how much more it will have to cut over on Christmas Eve.
In the Chancellor’s own words, the cuts in the grant will be offset as: “Other sources of income such as council tax and business rates are forecast to grow in cash terms by £6.3 billion by 2019-20.” But this ignores the obvious fact that not all local authorities are created equal. While the wealthier boroughs of London may be enjoying the benefits of economic recovery, many other areas are a long way off from full financial autonomy. In Rochdale, our local council has made great steps to fill empty retail spaces in the high street and to attract some of the UK’s biggest retail chains to be anchor stores for a planned development. These are positive moves, but it will be some time before this growth translates into extra cash in the council’s coffers. I believe greater devolution will free the entrepreneurial spirit in the regions and allow towns like Rochdale to flourish, but this will not happen overnight. In the meantime the Government grant is a vital lifeline.
Osborne talks of moving away from centralism, but can councils be expected to stand on their own two feet when the Government has kicked their legs out from underneath them? Rather than freeing them to succeed, many I speak to in local government are more concerned that the Chancellor is setting them up to fail.
(This article originally appeared in the Municipal Journal in December 2015)