Rob Hann and James Hughes examine the Autumn Budget Spending Review 2021, looking at what Public Bodies need to know.
The Chancellor of the Exchequer announced the Autumn Budget in Parliament on 27 October 2021, focusing on preparatory steps towards “a new economy post-Covid” whilst acknowledging the challenges COVID still presents, along with the supply chain shortages, and energy crises.
Despite the difficulties, the Chancellor announced that by the end of the current Parliament, Government spending will increase to over £177bn. We look at how this budget impacts the public sector and pick out some of the headlines which appear to have impact on public bodies (such as local authorities, NHS Trusts, central government departments and non-executive agencies).
Public bodies should be aware that the reopening of economies all around the world has resulted in global demand for goods exceeding supply. Coupled with the global demand for energy, this has only put inflationary pressure on prices. The Chancellor warned inflation is likely to “average 4% over next year” according to the Office for Budget Responsibility (OBR) based on the Consumer Price Index (CPI). Public bodies should aim to factor this in when planning their budgets for the next financial year.
Charter for Budget Responsibility
COVID has resulted in unprecedented public sector borrowing. As a result, the Chancellor announced a new initiative called the Charter for Budget Responsibility with a view to outlining fiscal rules to ensure the Government does not deviate from “the path of discipline and responsibility”. There are two fiscal rules:
(1) Net debt spending by public sectors must decrease as a percentage of GDP; and
(2) Borrowing should be reserved for investing in future growth and prosperity.
These rules must be met every third year of every forecasting period.
What this means for non-central public sector bodies is unclear.
The Chancellor has pledged:
- £1.7bn worth of investment in infrastructure “of everyday life in over 100 local areas”.
- £21bn worth of investment on roads and £46bn on railways to increase connectivity of towns and cities.
- The publication of an Integrated Rail Plan to demonstrate improved journey times between towns and cities.
- £5.7bn in London-Style transport that is to be disseminated across all parts of the UK including, to name a few, Greater Manchester, Liverpool, South Yorkshire, West Yorkshire and West Midlands.
- Further funding for local road maintenance which is estimated to be over £5bn.
It is clear that these pledges will have major implications to all forms of public bodies. This investment will likely result in procurements being required for works and services, many consultations, local job creation, and additional sources of income for public bodies through grants or subsidies.
Public Sector Services
As discussed, the Government pledges to increase its spending to over £177bn by the end of the current Parliament. It is particularly worth noting that local authorities will be eligible to apply for new grant funding worth £4.8bn over the next three years.
Health and Social Care Services
Notwithstanding extra revenue generated from the Health and Social Care Levy, the Chancellor pledged that 40 new hospitals will be built, 70 hospitals will receive upgrades, the backlogs caused by COVID will be tackled by making more operating theatres available and 100 community diagnostic centres will open.
The Chancellor also announced that better training will be available to health and social care staff, 50 million more primary care appointments will be available and 50,000 more nurses will be recruited.
It is hoped that this will help ease pressure caused by the pandemic. In this regard, emphasis is on the supply of public sector workers to meet demand. This will help public bodies improve quality of services whilst delivering at pace.
Housing and Development
The Chancellor announced a multi-year housing settlement, equating to circa £24bn, to invest in more housing and home ownership. Moreover, a further £11.5bn is being provided to build up to 180,000 new affordable homes, with a further commitment of £5bn to be used to remove high-risk cladding. The Chancellor noted that this initiative is partially funded by the “Residential Property Developers Tax …[and] will be levied on developers with profits over £25m at a rate of 4%”.
Currently, the demand for social housing placed on local authorities exceeds supply. This initiative will enable local authorities to reallocate budgets and focus on wide-ranging services.
Schools and Education
The budget provides additional funding of £4.7bn for schools by 2024 to 2025, which has the effect of increasing spending “for every pupil of more than £1,500”. Moreover, those with special needs and disabilities will have triple the amount of investment, thus creating “30,000 new school places”. In addition to the £3.1bn education recovery scheme that has already been announced, the Chancellor confirmed there will be a new fund of just under £2bn to help schools and colleges.
Whilst the effect of this cash injection on public-sector education providers is unclear, it is hoped schools and local authorities can use it to alleviate the financial problems caused by the pandemic. It hopefully provides some comfort to local authorities that educational budgets will not be further restricted as the country enters a post-COVID world.
COVID has resulted in further increased backlogs in both criminal and civil proceedings. The Chancellor pledged £2.2bn for court services, HM Prisons and Probationary Services. The Chancellor also included £0.5bn which is to be used specifically to reduce court backlogs.
The Chancellor’s Autumn is one of the largest budgets since post-war Britain. It must be remembered that this budget is a post-COVID recovery plan whilst also attempting to tackle the problems of increasing inflation and ensuing oil and energy crises.
Whilst the specific impacts on individual public bodies are still to be assessed, the potential for a cash injection to central government, local government, education providers, public health and social care providers, the legal system and in respect of regional levelling up, will be very welcomed.
Rob Hann is Legal Director and Head of Local Government and James Hughes is a Trainee Solicitor at Sharpe Pritchard LLP.
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