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‘More to be done’ on council borrowing freedoms

Industry bodies have now responded to the Autumn Statement, after Chancellor George Osborne set out a rise of the Housing Revenue Account borrowing cap by £300m, capped business rates and set out £1bn departmental spending cuts for a “balanced” recovery.

The LGA said that while the policy on borrowing “doesn’t go as far as we’d like” it was welcomed as flexibility to drive local growth.

The National Federation of ALMOs (NFA) welcomed the councils’ borrowing cap increase, but said there was still more to be done. Policy director Chloe Fletcher said it would “soften the worst effects of welfare reforms”.

But she added: “The £300m bidding programme from 2015/16 is someway short of the £7bn over five years that councils could prudentially borrow to build 60,000 new homes.”

Liz Peace, chief executive of the British Property Federation (BPF), said: “This was on the whole as good as we could have expected from the Chancellor.”

She welcomed the business rates cap, planning reform and changes to the REIT regime, but said the BPF remained “somewhat bemused” by the decision to make overseas investors liable for capital gains tax. A root-and-branch review of business rates would be a more sensible place to start, Peace said.

London Councils' executive member for housing, Mayor Sir Steve Bullock, agreed that increasing council borrowing “does not go far enough and has too many strings attached”. He called for a complete removal of the housing cap.

Mike Turley, head of public sector at Deloitte, the business advisory firm, welcomed the proposals to improve debt collection, but called for a more centralised approach to achieve this.

Paul Dossett, head of local government at Grant Thornton UK LLP said: “Encouraging greater economic activity locally – particularly via SMEs, the heart of our economy – is crucial. The below inflation level 2% cap on business rate increases, along with other measures announced today, should provide much needed economic impetus.

“However, the savings to businesses could impact on the level of business rates that can be retained by councils. The Audit Commission and Joseph Rowntree Foundation recently highlighted that the biggest reductions to funding for local authorities had fallen on the most deprived authorities. The business rate cap may be a particular issue for these authorities, where economic growth is more challenging and income from retained business rates is critical as an alternative to the on-going reduction to government grant funding.

“We feel there is much more scope to join up decision making so that both local government and local business can share the benefits of growth in a more structured way.”

Lizzie Crowley, head of youth unemployment programmes at The Work Foundation, warned that Osborne is “already taking the recovery for granted” and called for more action to tackle the UK’s youth unemployment “crisis”.

She welcomed investment in JobCentre Plus and the focus on higher level apprenticeships, but suggested that improving careers advice would have a far greater impact that scrapping Employer National Insurance Contributions for under-21s, saying: “This policy is unlikely to encourage a significant number of employers to take on more young people.”

Mark Beatson, chief economist at the CIPD, said: “According to the Office for Budget Responsibility, 2014 will be the first year since 2007 when economic growth will be over 2% and current levels of business confidence suggest growth could be even higher than the OBR forecast if investment picks up. The OBR have also recognised the strength of the UK labour market and now expect another 400,000 jobs growth in 2014.

“But as the Chancellor acknowledged, the UK’s productivity performance remains poor. This is why 2014 looks set to be the sixth year in a row when average earnings will struggle to keep up with prices. Business and government need to invest in infrastructure, tangible and intangible assets, including our people. The impact of growth on reducing the fiscal deficit is welcome, but we need to do more as a nation to address our management deficit. The increases in productivity needed to fuel sustainable prosperity can only be delivered if we get better at managing and developing the people employed in our businesses.”

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(Image: M. Holland)


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