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cipfa.org.uk cipfa.org.uk Conference Welcome Michael Burton Chairperson CIPFA Northern Ireland cipfa.org.uk Key finance and policy developments Simon Hamilton MLA Minister of Finance & Personnel Northern Ireland Executive cipfa.org.uk Economic overview Tony Travers Professor London School of Economics The wider context • The UK suffered a deep recession, followed by a return to relatively strong growth • 2.4% in 2014 and 2.2% in 2015 • Global growth at 3.7% in 2014 and 3.9% in 2015, according to IMF • US growing at 2.8% (2014) and 3.0% (2015) • The Eurozone is showing slower growth, coupled with continuing challenges to the Euro: 1.0% (2014) and 1.4% (2015) UK GDP, quarter on previous quarter Source: BBC, ONS Forecasts for 2014 Source: HM Treasury Forecasts for 2015 Source: HM Treasury How we got here…. • The post-1945 political and economic settlement – Welfare State/nationalisation – Development of powerful ‘social democratic’ expectations of consistent services throughout the country • Contemporary challenge is how to retain a State of 42-42% of GDP while deficit reduction requires 100% of public expenditure to be financed from current taxation • Taxation = 38% of GDP Taxation and public expenditure as % of GDP 49 Forecast 47 Per cent of GDP 45 43 41 39 37 35 33 1978-79 1982-83 1986-87 1990-91 1994-95 Current receipts 1998-99 2002-03 2006-07 2010-11 2014-15 2018-19 Total managed expenditure Source: O NS, O BR. Excludes Royal Mail and APF transfers. Source: Office for Budget Responsibility, Economic and fiscal outlook Charts and Tables, March 2014, Chart 1.1 Local government’s position • UK consists of four highly-centralised nations – over 95% of all taxation set by Chancellor • Gradual shift of powers, particularly within England, from local to central control • Northern Ireland has a local government system with relatively modest powers compared to the rest of the UK • Scotland and Wales have seen reduced local autonomy, but remain slightly more autonomous than England or Northern Ireland • Northern Ireland retains domestic rates, last revalued in 2005 • Local taxation has become problematic in Scotland, England and Wales – Only Wales has had a council tax revaluation, and then not since 2005 • But not capped or frozen – Scotland’s council tax frozen since 2007 – England: capping and freezing Local domestic tax vs tax receipts, UK Council tax/Domestic rates Total UK tax 2009-10 25.0 513.3 2010-11 25.7 550.8 2011-12 26.0 572.6 2012-13 26.3 593.3 2013-14 27.1 618.8 8.4% 20.6% Increase: 2009-10 to 2013-14 Local government and other services • The UK government has prioritised International Development, welfare, NHS and schools • Similar pattern within devolved governments for health and education • Local government, inevitably, has faced a greater spending squeeze so as to protect other programmes • ‘Austerity’ slightly less for NI local government, but not by much Current spending, by service group All GB property taxes require reform • Council tax • Revaluation, at the very least • Needs to accommodate the increase in very high value homes – Northern Ireland ‘£400,000 capped value’ and England Band H create a ‘flat’ rate for very high value homes • Non-domestic rates • Revaluations due in NI (2015) and E, W & S (2017) • Stamp Duty land tax • Significantly increased tax rates to capture part of capital gain on property • Capital gains tax on property • Used in addition to SDLT And now….Mansion Tax • The Liberal Democrats and Labour now favour a ‘mansion tax’ as an add on to council tax for homes worth (at today’s prices) over £2m • Such a tax would have to be grafted onto domestic rates/council tax – Decision required as to whether it would operate in Northern Ireland, Wales, Scotland • Yield to be used to fund national government services – NHS (Labour conference) • No fiscal gain to councils Other possible revenue sources • Levies on development – ‘Article 40’ Agreements (Northern Ireland)/‘Section 106’ (E&W)/‘Section 75’ (Scotland) – Community Infrastructure Levy (E&W only) • Road charges – Congestion Charge (London) – Workplace parking levy (Nottingham) • Business Rate Supplement – London (Crossrail) • Tax Increment Finance, eg – Edinburgh: Waterfront – London: Northern Line extension to Battersea • Fees and charges • Business Improvement Districts – Not part of local government, but may provide services; uses NDR base Possible reforms • London Finance Commission proposals • Devolve all property taxation to local government – Council tax, NDR, Stamp Duty, CGT and others • CIPFA/LGA commission on local government funding: UK-wide • Government and Opposition have discussed the possibility of giving greater freedom to city regions • ‘City Deals’ in a number of cities in England plus Glasgow allow some financial freedoms • Belfast and Cardiff to join Core Cities? After Scotland’s referendum • Commitment to further devolution to Edinburgh • Tax-raising powers, borrowing, welfare (part) • Wales • Similar tax proposals to Scotland already in place • Northern Ireland • Will the government request parity with Scotland and/or Wales? • England • Barnett Formula concerns; English Parliament?; Regions? City regions? The future • UK economy now growing, though some uncertainty remains • Northern Ireland, England, Wales, Scotland all operate relatively centralised systems of local government • Domestic rates/council tax = 5% of all UK taxation • Additional devolutionary tax-raising powers for Scotland and Wales do not affect this within-nation centralisation • Need for a wider acceptance that the UK is out of line by international standards • Has the UK simply become so fiscally centralised that some form of tax decentralisation is inevitable? • Debate about Scotland, Wales will affect Northern Ireland and England Economic Overview – international, national and local issues Tony Travers London School of Economics cipfa.org.uk/scotland Refreshments 11.00 to 11.30 cipfa.org.uk The politics of change Quintin Oliver Joseph Rowantree Foundation cipfa.org.uk/scotland Tracks cipfa.org.uk Managing demand Ben Lucas Director 2020 Public Services Trust Building future public services – the role of demand management Presentation to CIPFA NI Conference, Belfast, 25 September 2014 By Ben Lucas – Chair of Public Services at the RSA Two possible futures… Retrenchment and residualisation Redefining relationships & citizen engagement New Times What do we mean by demand management? Use new technology • New channels of ‘conversation’ with citizens • Potential of analytics, data integration & connected services • Managing demand through better service design Understand how to work with the grain #1 RSA finding: “we don’t know!” #2 “social support & community is not always what we think it is…” #3: “everything is linked…” Get beyond the services • What makes a meaningful difference to peoples lives? • How can local authorities use their socio-economic clout? • Not just about behaviour change, but building capacity and supporting citizens Public Services and Growth: two sides of the same coin • Growth and demand management as interdependent • City growth and fiscal rebalancing deals – Devo Met • Developing the ‘social’ role of business & the growth potential of public services Local leadership – the politics • Community leadership as a driver of demand management • Co-operative Innovation • Creating a ‘shallow end’ and a sense of togetherness Whole place system change Reactive/Proactive Split 2011/12 in Greater Manchester GM Revenue budget 2011/12 Reactive spend by agency (£m) GM Revenue budget 2011/12 Reactive spend by category (£m) R Visio http://www.oldham.gov.uk/letstalkbudget cipfa.org.uk Overcoming conflict to improve public services Rena Shepherd cipfa.org.uk/scotland Refreshments 15.15 to 15.30 cipfa.org.uk Mike Stevenson - Managing Director [email protected] Follow us on Twitter @thinktastic www.thinktastic.co.uk cipfa.org.uk/scotland Close and Reception