Chancellor George Osborne’s Autumn Statement has confirmed the extension of austerity measures until 2018, squeezing local government into a longer period of financial retrenchment.
Osborne told a packed House of Commons: ‘It is a hard road and Britain is on the right track. Turning back now would be a disaster.’
The chancellor ruled out additional £17bn public spending cuts to meet the government’s debt target, despite weak economic growth. Osborne said the Coalition was on course to meeting its fiscal target – of having a better than 50% chance of eliminating the current structural deficit in five year’s time,
However, citing tougher economic conditions, he said it will now take not three years, but four to scale back the deficit – prolonging austerity until at least 2017/18.
Local government is to be spared the 1% cutbacks facing unprotected central government departments in 2013/14, the chancellor announced. But Osborne said councils would be subject to the full 2% cash reductions sought from Whitehall departments in 2014/15.
The cash reductions form part of a plan to provide a £5bn boost to capital projects for new schools, transport schemes and scientific research.
Unprotected departments – excluding the departments for health, education, international development and HM Revenue and Customs – will be forced to make additional 1% cutbacks in 2013/14 equivalent to £1bn, rising to 2% or £2.5bn in 2014/15.
‘All the money saved in the first two years will be reinvested in £5bn capital funding,’ Mr Osborne said. The chancellor announced £1bn of cash for road schemes and pledged a further £1bn to build 100 new free schools and academies.
The chancellor also promised new money to Local Enterprise Partnerships (LEPs) to boost growth and additional cash for the Regional Growth Fund.
Osborne also endorsed the devolution of a greater share of growth related spending to local areas a key recommendation of Lord Heseltine’s recent growth review – which he said had captured the imagination of all political parties. He promised the next Spending Review would outline how from April 2015 LEPs would be able to bid for funds for transport and skills from a ‘single pot’.
As part of measures to lower welfare spending, the chancellor said local housing allowances would be uprated in line with existing policy in 2013/14, but would then increase by 1% in the two following years. This move is in line with plans announced to limit working age benefits to annual 1% increases over the next three years, as part of moves to save £3.75bn in 2015/16 and further annual savings thereafter.
The chancellor said the private sector had created 1.2 million jobs since the Coalition came to power and said employment was set to increase in each year of the independent Office for Budget Responsibility’s forecasts. He claimed two private sector jobs were being created for every public sector job lost.
Osborne also announced a replacement for the ‘discredited’ private finance initiative (PFI) scheme for funding major capital projects.
Osborne said since the public sector had shared the risk, ministers would ensure the public sector would also share the reward of the second wave of PFI schemes to upgrade national infrastructure.
The chancellor also ruled out introducing any new homes tax.