Minutes:
(1) Dave Shipton (Head of Financial Strategy) gave a verbal update on the Chancellor’s Autumn Statement. He said there was very little in it that would change KCC’s financial plans as the outlook remained exceptionally challenging with flat cash between 2015/16 to 2019/20 (comprising reduced government funding and increased council tax). Authorities would not receive any additional money and rising costs and spending demands would have to be offset through savings.
(2) The Chancellor had specifically announced there were would be no changes to the departmental spending plans announced in the Spending Review last year. The only glimmer of hope was the Chancellor’s announcement that £1bn of the savings in these departmental plans would be made available for re-investment by spending departments by 2019/20 but no details were available. If Department of Communities and Local Government agreed, the local government share might be around £300m to £400m (and KCC’s share might be £9m to £12m) however this would not happen until 2019/20.
(3) The Chancellor had announced an increase in the National Living Wage from £7.20 to £7.50 an hour from April 2017 which would have an impact on Kent pay scales for 2017. As part of deciding the Kent pay scheme for 2017 a decision would be needed about whether to match or exceed the National Living Wage. The increase in the National Living Wage would have a bigger impact on some contracted services, especially social care, although this increase was within the bounds of the estimates presented in KCC’s Autumn Budget Statement to County Council on 20 October.
(4) The Chancellor had announced investments in infrastructure to be funded within the additional borrowing included within the fiscal forecasts in the Autumn Budget Statement. Any other investments would have to be funded within the tax and spend plans. Within the £1.1bn for transport infrastructure “to keep Britain moving” was £200m for traffic “pinch-points” but no detail about accessing the funds had been provided. Other investments would be in digital signalling on railways, housing and broadband. There would be 100% business rate relief on new fibre infrastructure and it was assumed that local authorities would receive commensurate compensation. Local Enterprise Partnerships (LEPs) would benefit from an additional £1.8bn in the Local Growth Fund of which £683m would be available to LEPs across the South West, London and theSouth East. Mayoral authorities would also have new borrowing powers.
(5) In the Autumn Statement, the Chancellor had announced lower economic growth forecasts which would impact on tax yields and mean increased government borrowing (in addition to the increased borrowing for infrastructure investments) and that a budget surplus would not be achieved until the next parliament.
(6) As a result the accumulated net debt would continue to rise (from £1.61tr in 2015-16 to £1.952tr in 2021/22) peaking at 90.2% of GDP in 2017/18. The Chancellor had set new fiscal targets of:
· a budget surplus to be achieved as early as possible in the next parliament;
· the net deficit to be less than 2% of GDP by the end of this parliament; and
· Net debt as a percentage of GDP to be falling by the end of this parliament
(7) Mr Shipton said that, in essence, the Chancellor had built in scope for even lower economic growth than announced in the Autumn Statement.
(8) The Chancellor had announced some changes to business rates which needed further evaluation. In particular he had announced changes to the transitional reliefs following the recent re-valuation (which could have an impact on the cost of the rates on KCC’s premises and on the overall business rate income from 50% retention). These changes could mean a substantial increase in business rates on larger properties with rateable value over £100k. These properties could also see up to 42% increases in business rates where the rateable value had gone up following the recent re-valuation, and this was much higher than previous transitional arrangements.
(9) The Chancellor had also announced additional relief for rural businesses (and broadband fibre infrastructure) which could impact on KCC’s share of the income; however, it was being assumed the authority would receive compensation in the form of a grant.
(10) Finally the Chancellor announced that, in future, the main budget (setting out tax and spend plans) would be in the autumn from 2017 onwards and the mid-year consolidation in the spring from 2018 onwards.
(11) Mr Simmonds (Deputy Leader and Cabinet Member for Finance and Procurement) said that the County Councils’ Network and the Local Government Association had made representations to government about the pressure on social services.
(12) Resolved that the verbal update be noted.