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Where the funding falls

sir merrick cockell | the mj | 27 November 2015

It may have been billed as the Autumn Statement but it was the third budget of 2015. While the shadow chancellor tossed Mao’s Little Red Book on the Table of the House, it was George Osborne who thumped the Red Book down and stamped his dominance on the Commons as the most political chancellor in recent times.

With the Spending Review aligning with the Autumn Statement, his statement was all about where the cuts would fall. Without the dominance of Simon Stephens forcing additional funding for the NHS or massed generals and admirals demanding more defence spending, it was inevitable that local government would be singled out again - victims of delivering far more than their share of savings over the last five years.

As they face a further 24% real terms cut over the spending period, there is clearly not going to be any let up in the need for councils to find additional efficiencies and to make tough decisions about non-statutory services. Equally, allowing local authorities to raise council tax to fund social care just adds another difficult choice about whether to increase the burden on local taxpayers. Even those that impose the two per cent rise are still going to have to manage acute pressures on the local health and social care economy.

However, in a very complex picture of changes, there were also some new opportunities for councils and some ambitious promises. The chancellor strongly re-emphasised the importance to this government of infrastructure investment and – allied with his speech at the Conservative Party conference – this is clearly an area in which he sees public pension funds having in impact in the future.

Health and adult social care

Future of health and social care report



Osborne frequently describes himself as ‘The Builder’ and these ambitions for pension funds may not only help to build transport schemes, generate power and build homes but also improve our performance and alleviate the deficits facing many public sector pension funds – something we desperately need.

As the chancellor pointed out, in the last week Britain has topped a league table of the best places in the world to invest in infrastructure. Many large foreign pension funds are able to take advantage of this and invest in infrastructure here, so why can’t we?

The days of councils planning great schemes and then looking in vain for funding are over. Part of the solution is the recently founded, sector-owned UK Municipal Bonds Agency. Another is pooling pension funds at scale where a prudent level of direct investment in long-term projects from house and road building, to commercial and mixed use developments, or large scale regeneration projects can have a significant and visible social benefit in addition to improved financial returns.

This type of progress has been long awaited and much needed for UK public sector pension funds but it has needed Government to force change and now it is finally happening.
Other key policy changes that are opening up new options for local authorities include the abolition of uniform business rates by allowing local councils the power to spend locally raised business tax as they see fit. This freedom and flexibility is an important change and a real opportunity for councils to take their place at the centre of driving future economic growth in their communities.

All this adds up to a challenging picture for local government where sustaining day to day services is going to require more innovative thinking, partnership and relentless focus. But equally, there are some emerging opportunities that will develop and extend councils’ roles in building the social and economic infrastructure their communities need.

Sir Merrick Cockell is a senior adviser at PA Consulting Group and chairman, London Pensions Fund Authority

David Rees

David Rees, Local government Connect Email

The Local government team Email +44 (0) 207 333 6185

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