Budget days and autumn statements are always occasions of great drama: rabbits are pulled from hats, little red books are tossed across the dispatch box, and soundbites abound. Yesterday’s budget was no exception. Alongside four references to the “long term economic plan”, there were at least six exhortations to “act now so we don’t pay later”. The big headline announcements included everything from cuts in UK growth and productivity to cuts in sugary drinks.
Yet even before he stood up, the chancellor’s options were tightly constrained. With public sector debt fixed stubbornly above 80% of GDP, there was little room for complacency. Having failed to achieve the budget surplus in 2015 that he promised in 2010, George Osborne knew the choices he made today could not be allowed to jeopardise his updated pledge to achieve a surplus by 2020.
The result is a rapidly shrinking state. The chancellor’s announcement earlier in the week that he would need to find “savings equivalent to 50 pence in every £100”spent might sound relatively benign but it comes on top of previously announced plans for year-on-year reductions that will see the size of the State shrink to just 36.9% of GDP by 2020. This compares to a 50-year average of over 40%.
The consequences for the public realm will be dramatic and the cracks are already showing. Since 2010, public satisfaction with the NHS has fallen from 70% to 60%, while the number of people sleeping rough has risen by over 50%. Councils are turning off street lights to cut their energy bills and the search is on for new ways to support local communities and vulnerable groups.
Part of the answer undoubtedly lies in the potential for social investment to transform public services. So it was disappointing that the chancellor had nothing to say about it in his speech yesterday beyond a peripheral reference to the Rough Sleeping social impact bond that he announced at the last autumn statement. By contrast, the Cabinet Office’s plans, published last week were both ambitious and welcome, particularly as the financial returns on social investments nudge ever closer to positive territory.
Yet social investment alone will not be enough to make up the difference as the state continues to retrench. Increasingly local people will need to look to their own resources. This is where the growth of ‘community businesses’ offers a new way forward. A recent report by Social Finance found that, while the overall size of the market is small, the number of new community businesses is growing at a rate “that would make even China jealous.” From taking over local parks and libraries, to running community transport schemes, to building multi-million pound local energy projects, these local enterprises offer a new model that is both sustainable and genuinely reflective of community needs.
Given the demands of political showmanship on budget day, it was therefore heartening to hear the Chancellor announce that £60m of Stamp Duty revenues would be diverted to support community-led housing developments. There was also a promise to consult on how the new Shale Wealth Fund could be deployed in local communities. Alongside the much larger sums of money that make up a budget statement, these were small gestures. But they will make a big difference to the communities that benefit and they could help to ease the inevitable shift in the relationship between the state and the citizen.
This article first appeared in Pioneers Post on 17 March 2016.