Download Spending Review - Nottingham Insight

Nottingham City Council
policy alert
22nd October 2010
PA/10/10
Spending Review 2011/12 - 14/15
Introduction
The Spending Review announced on Wednesday 20th October by Chancellor George
Osborne sets out the Government’s spending plans for the next four years (2011/122014/15). The Spending Review outlines the spending for each Government department.
The Chancellor said that the Spending Review is based on the principles of reform, fairness
and growth. He announced that “across the entire deficit reduction plan, those with the
broadest shoulders should bear the greatest burden”.
This Policy Alert covers the key points from Wednesday’s announcement. There will be more
information released from departments over the coming days and weeks, which we will be
closely monitoring and analysing. We do not yet have a full picture of what all the changes
involve and what they will mean for Nottingham City Council and partners. Some
announcements have been deferred (such as transport), departmental spending plans are
expected next month and individual local authorities will not get information on their
settlement until December 2010.
Local Authority Finance
Announcements
 The Chancellor announced a 7.1% reduction each year in funding to local government
through the main grant (‘formula grant’), which is equivalent to a 28% reduction over 4
years.
 The Government is ending ring fencing of all revenue grants to local authorities except
simplified school grants and a new public health grant from 2013. In addition the number
of targeted grants will be reduced from over 90 to fewer than 10, including ending
Working Neighbourhoods Fund and any new Growth Area funding.
 The Chancellor announced that the local government settlement will include funding in all
four years of the Spending Review to enable local authorities to freeze their council tax in
2011/12. As yet, local authorities have not had sufficient information to understand
whether the amount pledged will be sufficient to cover increasing demand for local
services.
 Capital funding from all departments to councils will fall by around 45% over the Spending
Review period.
 Councils will retain some important tools to invest in capital such as Prudential Borrowing
and PFI, but the cost of borrowing has been increased and these tools will be controlled
more closely by central Government departments.
 Councils will also receive some new tools to invest in infrastructure including Tax
Incremental Finance.
Implications for Nottingham
The Local Government Group points out that the fall in the local government grant is
significantly frontloaded. This means that the biggest cuts will happen in the first two years of
the Spending Review period. The full implications for Nottingham City Council will not be
known until the December settlement.
Nottingham has previously been successful in securing specific grants intended to support
more deprived areas. Reduction in the number of these grants and changes to how
remaining funds are allocated is expected to have a disproportionate impact on big cities
such as Nottingham. For example Nottingham’s allocation of Working Neighbourhoods Fund
for 2010/11 was £12.3 million, therefore the ending of this specific grant will have significant
implications for the city.
Department for Work and Pensions – Welfare reform
Announcements
 Welfare reform continues with an extra £7 billion to be saved, on top of £11 billion
previously announced (giving a total of £18 billion per year by 2014/15).
 A Universal Credit is to be introduced for all working age means-tested benefits; transition
to this system will be complicated and therefore is expected to be implemented over the
next two Parliaments.
 In the meantime, the Government will:
 Cap household benefit payments from 2013 to a maximum of £500 per week
 Withdraw child benefit from higher rate tax payers from 2013
 Introduce further changes to the tax credit system
 Time limit claims for contributory Employment Support Allowance
 Increase the age threshold for the shared room rate in housing benefit from 25 to
35 (i.e. restrict payments to the value of a single room)
 Universal benefits for pensioners such as free eye tests, free prescription charges, free
bus passes and free TV licences for the over 75s will remain. Winter Fuel Payments will
remain as budgeted for by the previous Government and, as announced previously, the
link to earnings restored for the state pension. The Government will raise the State
Pension Age for men and women to 66 by April 2020.
 Reform to public sector pensions: the Government is awaiting the outcome of the Public
Service Pension Commission in spring 2011 before firm proposals for reform are
announced. However, the Chancellor indicated that it is likely that there will need to be an
increase in employee contributions but that these would need to be staggered and
progressive.
Implications for Nottingham
In Nottingham we will have a high level of exposure to the welfare reforms because of the
large number of citizens who claim benefits but also because of concentrations in particular
areas of the city.
These announcements need to be viewed in the context of the other changes previously
announced, expected to impact upon household finances. These include the VAT rise to 20%
in 2011 (with existing exemptions retained, e.g. food, children’s clothes), which is likely to
disproportionately impact on households with low incomes. Also the move to index link all
benefits to the Consumer Price Index rather than Retail Price Index will act to dampen benefit
increases based on current prices.
In addition, the extensive changes in eligibility of welfare and general tightening of criteria for
both in-work and out-of-work benefits are already increasing demand for advice services
locally.
Note: This policy alert is for information only, and does not constitute official Nottingham City Council policy
Department for Education – Schools
Announcements
 Overall resource savings in Department for Education’s non-schools budget of 12% in
real terms by 2014-15.
 Protection of the schools budget including £2.5 billion pupil premium to incentivise good
schools to take children from poorer backgrounds. This is funded by savings from other
areas in education including reform of Education Maintenance Allowance (an incentive for
young people entering further education).
 Provision of 15 hours per week free education and care for two year olds from
disadvantaged backgrounds.
 Sure Start to be maintained in cash terms but to be re-focused on its original purpose of
improving the life chances of disadvantaged children.
 The Chancellor reaffirmed the Government commitment to reducing child poverty and
announced plans to use some of the savings from withdrawing Child Benefit from families
with a higher rate taxpayer to fund increases in the Child Tax Credit. The aim is to ensure
that the Spending Review does not have a measurable impact on child poverty in the next
two years. The Government intends to set out its longer term strategy for tackling child
poverty in by the close of March 2011, following Frank Field MP’s review on poverty which
reports at the end of the year.
Implications for Nottingham
The Local Government Group has said the reduction in non-schools budget of 12% is
announced without reference to the impact on non-schools spending areas, such as child
protection. They observe that nationally there are "significant pressures" in relation to child
protection and these cuts "will make it a challenge for local authorities to fund services such
as child protection".
It is not yet clear to what extent deprived areas will benefit from the announcements in the
Spending Review, for instance it is the view of the Institute for Fiscal Studies that the Pupil
Premium is not necessarily progressive.
Levels of child poverty in Nottingham are relatively high, with 64% under 18s living in poverty
in 2006/07. We are committed to reducing child poverty and all One Nottingham partners are
working together to halve the proportion of children living in poverty by 2020.
Communities and Local Government - Housing
Announcements
 Social housing landlords will be able to issue ‘intermediate rental contracts’ at prices that
are nearer to market rates (up to 80% of market rent) and for fixed periods of time. The
terms of existing social housing tenancies will remain unchanged.
 £6 billion funding over the next four years for the Supporting People programme, which
supports vulnerable people to live independently.
 Decent Homes funding (for improvements to existing social housing) continues but it is reprofiled.
 A New Homes Bonus will be introduced to reward local authorities and communities for
building new homes. The Government envisages that the money generated by increasing
social housing rents will be used to build more affordable housing.
 Government remains committed to reforming the housing revenue account system but as
yet little detail has been forthcoming.
Implications for Nottingham
The combination of changes to rental contracts for social housing tenants together with the
Local Housing Allowance impacts on private sector tenants are likely to place significant
Note: This policy alert is for information only, and does not constitute official Nottingham City Council policy
pressure on our citizens’ ability to meet their housing costs. This is likely to bring additional
pressure on social housing with a risk of a rise in homelessness. The Spending Review
announcements come in the context of housing benefit reforms already announced in the
June budget that could affect up to 6,500 claimants in private accommodation in Nottingham
who may have to find cheaper accommodation.
The Local Government Group have said that the proposals to place new tenants on a
different contractual footing from existing tenants could mean that residents will be paying
different rents for the same service.
The announcement of continued funding for the Supporting People programme to support
our most vulnerable citizens is helpful but it is as yet unclear as to what this means for
individual local authority settlements.
The re-profiling of funding for the Decent Homes programme has significant implications for
Nottingham. The programme was originally expected to be completed by 2013 however the
Government has now spread the programme funding over an additional two years, to be
completed by 2015. Nottingham City Homes are concerned about the implications that the reprofiling will have for the current programme of improvements for tenants in terms of
timescales and expectations.
Department of Health
Announcements
 Real terms increases in overall NHS funding in each year to meet the Government’s
commitment on health spending, with total spending growing by 0.4% over the Spending
Review period. Any efficiency savings are to be re-invested.
 An additional £2 billion a year to support joint working between health and social care by
2014/15: £1 billion of this will be funded through the NHS, and £1 billion through local
authority formula grant.
 Expanding access to psychological therapies.
 The Government wants to significantly extend the use of personal budgets across a range
of service areas including special education needs, support for children with disabilities,
long term health conditions and adult social care.
 £220 million of capital funding has been allocated for the UK Centre for Medical Research
and Innovation, subject to approval of the final business case.
Implications for Nottingham
The announcements to invest in mental health support are important to Nottingham given the
prevalence of mental health problems in the city. Continued support for personal budgets is
also welcomed.
Additional adult social care funding is welcome, but it may not cover the estimated rise in
annual costs for adult social care, which the Local Government Group estimate may reach
around £6 billion by 2014/15. In Nottingham over coming years we anticipate an increased
demand on health and social care services due to a growing and more complex set of needs.
The number of residents aged 85 years and above is projected to increase, and the number
of people with disabilities, particularly more complex disabilities and needs, is growing,
bringing an increased demand for services.
The NHS protection in funding does not account for higher inflation costs related to the health
service and need to be viewed in the context of the Government’s plans to reduce NHS
management costs by over 45% by 2014.
Note: This policy alert is for information only, and does not constitute official Nottingham City Council policy
Home Office and Ministry of Justice – crime and community
safety
Announcements
 Central Government police funding will reduce by 20% in real terms by 2014-15.
 There will be a new National Crime Agency to combat organised crime
 The Government will soon be consulting on reforms on the availability of legal aid and
reform of the sentencing framework to stem the rise in the UK prison population.
Implications for Nottingham
Nottinghamshire’s Chief Constable Julia Hodson said: “Although it will be towards the end of
the year before we know what our individual grant allocation from the Government will be,
today’s announcement confirms the Police Service faces some tough challenges over the
next four years.”
Around 88% of people who have so far responded to the City Council’s Your City Your
Services survey said they were concerned or very concerned about crime levels rising as a
result of the current economic situation. Two thirds of respondents – one of the highest
responses – said that tackling crime and anti-social behaviour was very important.
Department for Business, Innovation and Skills
Announcements
 From the 2012-13 academic year, universities will be able to set higher graduate
contributions. This is in the context of major reform to Government funding of universities,
details of which are expected soon.
 The Government has pledged to establish a new £150 million National Scholarship fund
to support students from disadvantaged backgrounds into higher education.
 Loans will be more widely available including to part time students and to those aged 24
and over wishing to study A Levels or equivalent
 The Government will prioritise support for science by maintaining spending in cash terms
and any efficiency savings will be reinvested
 Train to Gain will end; the Government’s emphasis moves from training to employment,
with £250 million for adult apprenticeships by 2014/15, bringing 75,000 adults into
apprenticeships each year.
 £1.4 billion over next three years for the Regional Growth Fund (2011/12 to 2013/14),
intended to support projects that will accelerate economic recovery.
Implications for Nottingham
As a city with two top universities, the changes to higher education funding will have
significant implications. The universities are important employers in Nottingham and at this
point it is unclear how this will affect numbers of jobs. Any increase in fees may restrict
access to higher education for our young people, although the National Scholarship fund
could help. Our universities attract students from across the country and around the world,
and they make a significant contribution to our local economy and make up around 13% of
the city population.
As one of the UK’s six Science Cities, support for the science budget is important for
Nottingham. The University of Nottingham and Nottingham Trent University between them
host some of the world’s leading scientific research teams and train the UK’s most innovative
designers.
The announcement on apprenticeships is welcome and should enable us to build on very
successful local programmes.
Note: This policy alert is for information only, and does not constitute official Nottingham City Council policy
Department for Transport
Announcements
 Government support for NET Phase 2 (tram lines 2 and 3).
 Re-signalling in Nottingham to bring improved performance for train services operating
through Nottingham.
 M1 and A46 improvements in East Midlands.
 Rail fares will increase by 10% in real terms over the next four years and the bus subsidy
is to be reduced by 20%.
 The Secretary of State will set out how more of the transport funding will be allocated
imminently.
Implications for Nottingham
The announcement that the Government intends to pursue lines 2 and 3 of the tram network
(NET Phase 2) is positive. Leader of Nottingham City Council Cllr Jon Collins says: "This goahead means the extended tram network can now play its key part in shaping the future
prosperity of this city, helping Nottingham to weather the current economic storm and come
out the other side stronger and more resilient. The city will be even more attractive to
employers as a place to locate, bringing more jobs and creating more wealth for our citizens.”
Although concessionary fares will remain unchanged, the reduction in bus subsidy paid by
Government direct to bus operators, without reform of the system, could put pressure on
services.
Department for Energy and Climate Change
Announcements
 £860 million for Renewable Heat Incentive to be introduced from 2011-12.
 From 2013 support for heating and insulation for the most vulnerable will be delivered
through the Green Deal for energy efficiency and a new obligation on energy companies.
This will enable the phasing out of the Warm Front programme over time.
 £1 billion funding and additional money from asset sales for a UK wide Green Investment
Bank. This would aim to provide financial interventions to unlock significant new private
investment in green infrastructure projects, e.g. offshore wind farms.
Implications for Nottingham
As more detail emerges we will be working to identify how these measures can support the
delivery of the Energy, Waste and Climate Change Strategies and alleviate local fuel poverty.
All One Nottingham partners are committed to generating 20% of the city’s energy from low
or zero carbon sources by 2020, and this funding will assist with this.
Various
Announcements
 Fire resource expenditure will reduce by 13% in real terms over the Spending Review
period. This will require the Fire and Rescue Service to modernise, increase efficiency
and deliver workforce reform. It will be for individual fire authorities to decide how to make
these savings.
 “Community budgets” will be established in 16 local areas to enable them to pool
departmental budgets for families with complex needs, enabling a more flexible and
integrated approach to delivering the help these families need. This will be rolled out to all
local areas over the Spending Review period.
 The Office for Civil Society has been funded to provide support for growing the Big
Society. This will include encouraging volunteering, building the capacity of the voluntary
and community sector, establishing community organisers and setting up a Community
Note: This policy alert is for information only, and does not constitute official Nottingham City Council policy

First Fund to support local and community organisations. In addition, it will pilot a National
Citizen Service, which will support young people from different backgrounds to develop
skills and engage with their communities.
In recognition of the challenges faced by the voluntary and community sector, the
Government announced a £100 million transition fund to provide support to organisations
delivering frontline services that stand to be affected in the short term by reductions in
spending.
Implications for Nottingham
We will watch the “community budgets” projects with interest as we learn from our own ‘Total
Place Approach’ to working with complex families. Although Nottingham is not a pilot area for
community budgets, we are trialling our own approach to better integrated working with
families with complex needs.
Overall implications
The Local Government Group have said that local government has had some of the biggest
cuts in the public sector and most are significantly frontloaded 2011/12.
All public sector service providers are taking difficult financial decisions. Nationally nearly
500,000 public sector jobs are estimated to go over the next 4 years. This will have an impact
on Nottingham and Nottinghamshire, as public services (including health, education, local
and national government and agencies) account for around a third of all Greater Nottingham
jobs, compared to the national average of just over a quarter.
The voluntary and private sector have also benefited from significant public sector spend in
recent years, so there may be wider economic impacts.
Partners will continue to work together through the One Nottingham partnership to minimise
the impact on our most vulnerable citizens.
Further reading
Spending Review Framework
HM Treasury Spending Review web pages
Briefing on welfare reform implications for Nottingham
June Budget briefing
Big Society
Further advice or questions
Claire Richmond, Head of Corporate Policy on 0115 87 63414
Liz Jones, Head of Partnership Policy on 0115 87 63367
Note: This policy alert is for information only, and does not constitute official Nottingham City Council policy