Wednesday, 27 May 2015

Camden's cuts challenge - Post 11 - after the 2015 election

Here's a short note outlining an initial view of future spending cuts from central government on Camden - in the light of the Queen’s speech and the post-election new budget.  (General information on the cuts and decisions taken so far is set out on the council website).

Revenue funding for services
It remains very difficult to predict the level of funding cuts for local authorities until the Conservative government sets out a Spending Review – which is expected at some point over the next few months. There will be a ‘stability budget’ on 8 July setting out how manifesto commitments will be funded and further cuts to public spending, including large welfare cuts.

Budget 2015 projections were slightly worse than the Budget 2014 projections from which we anticipated that we would require £70m of reductions over the 3 years to 2017/18 and a further £20m of reductions in 2018/19 and therefore remain an indicator that the savings requirement will be at least as high as that already anticipated.

It is difficult to derive precise departmental spending estimates from the commitments in the Conservative manifesto, or to know whether these would be a reliable indicator of any future settlement.  However, the Institute for Fiscal Studies noted that the Conservatives planned more significant spending cuts up to 2018/19 than the other major parties and would deliver them more quickly.

Cuts to schools
There are particular concerns in education funding, where a commitment to ‘equalise’ spend across the country could lead to cash freezes for schools (until other areas catch up) with the possibility of major cuts to high needs and early years spending should the government adopt a formula-led approach to redistribution.  In order to deal with extra cuts here and continue our investment in under-5s, funding for other discretionary services (e.g. street cleaning, voluntary sector, sports, youth work) will come under further pressure. 

It will therefore be important to keep sight of the ‘savings under development’ in the December finance report (£5m) and it may be necessary to revisit the cuts not put forward earlier this year at relatively short notice should the outcome of a Spending Review - or the announcement of the July budget require this.  

Further discussions may be needed to challenge which services and outcomes are prioritised and how they are delivered.

Capital funding of public infrastructure, homes and schools
Our capital programme stands at £1.2bn, but only 6.6% of this funding requirement is met from Government grants.  The lion-share of investment comes from our own self-financed Community Investment Programmeclick here for updates on what we are building in your area.  

There is no indication that the government will reverse its stance on the cuts to capital funding introduced in 2010. Therefore, except from distinct and ad-hoc grants such as from the GLA for Better Homes repairs work, the Council will continue to rely on generating its own resources to fund the vast majority of its capital programme (both regeneration and essential backlog maintenance) – primarily through the disposal of surplus or under-utilised assets and especially from the receipts generated through Community Investment Programme regeneration schemes.

Assets that are allowing the Council to self-finance the Community Investment Programme can only be utilised once – whether this be a disposal or the regeneration of land to create new homes and community facilities – and therefore more difficult decisions may be required to provide the resources we need to meet the Camden Plan.  Rising labour and material costs in the construction industry are already putting a strain on budgets and have led to difficulties in attracting the right calibre and quantity of tenders during procurement. With some live projects we are considering options such as re-profiling or merging phases to offset the increasing costs and come in on budget.  

Forced sale of council homes in ‘expensive areas’
The proposed housing association right-to-buy funded through sales of empty council homes in ‘expensive areas’ poses a fundamental risk to the Community Investment Programme’s aim to build 1400 new council and intermediate homes in the coming years. Changes to housing association funding signal uncertainty with social house building in general. The detail of how the manifesto pledge will be implemented by the government will be very important for our housing plans.       

More difficult choices
For a sustainable capital strategy that’s able to withstand a further five years of austerity, choices that may have been unpalatable in the past may increasingly need to be considered as part of the evolution and development of the Programme. For example, the balance between future repairs investment vs redevelopment on housing estates may change; further emphasis may be needed to invest in schemes which raise revenue; projects currently at master-plan stage could be subject to challenge and reallocation of resources if necessary; funding options such as selling some blocks in advance may be considered in to manage cash flow and risk; and further capital may be needed from projects, something which has proved challenging in our party (e.g. the £3m extra receipt from Liddell Road).  


In short, the new financial situation will require some difficult discussions about what we choose to fund and considerable innovation and fresh ideas on how we run public services over the next few years.

Sunday, 10 May 2015

Rebuilding confidence in Labour's economic competence starts in London in 2015

Here are some more thoughts on how the 2015 General election plays out in London, with an eye on the Mayoral selections and elections:

London is our first real test
The first real test for Labour, with or without a new leader, is the London Mayoral selections in June and the Mayoral election in 2016.  Decisions the party membership makes here will signal early whether we learn the lessons from the 2015 defeat.  London is a platform for renewal, not a last loyal redoubt where we can angrily lead the fightback against the Tories: and repeat the mistakes we just made.  In any case, the power of the Mayor of London comes from consensus between boroughs and negotiation, not conflict, with central government and Whitehall.  Using City Hall as a convenient pulpit for the Left will fail Londoners, and ultimately the Labour Party. The eyes of the nation will be on us right from the start to see whether we 'get it'.  

Rebuilding confidence in our economic record starts in London
The 2016 London election offers a chance for Labour to elect a Mayor in the most economically prosperous part of the country and an opportunity to start rebuilding trust in how we run things.  Our candidate - I think this should be Tessa Jowell - should have an unashamedly pro-growth and pro-jobs pitch. They should focus on London's new strengths - tech and bio-med.  They should understand how the economy here is changing in both good ways (lots of opportunity) and bad (alienation of Londoners from best jobs, high costs of childcare), and react as per the ambition/compassion balance outlined by Tony Blair.  We should be saying something meaningful to the self-employed, the start-ups and small firms: not just through traditional funding levers but through a broader suite of initiatives like tax incentives, simplifying tax and providing cheaper office space, for example secured with the help of councils like they do at Camden Collective.  We need to say loudly and without equivocation that 'we are on your side and its also through you doing well that as many Londoners prosper as possible'.

This also matters to public services
This isn't only a question about the economy, public finances increasingly rely on local economic growth as central government grant is cut.  From the perspective of a Cabinet member for Finance: a Mayor of London who brings in more inward investment is good for our bottom line.  But they should go further and cajole and encourage London's boroughs (each the size of a small-to-medium English city and responsible for at least £1bn each per annum) and the local public sector to spend public money much more effectively. Camden's new outcomes-based budget approach and our use of technology with the NHS is an example where we can spend money more effectively, despite the cuts, and give public servants and citizens much more of a role in shaping their local services together.   


London is not a done deal
Finally, although Labour is ahead in London, it is by no means 'in the bag' - the Tories tend to win when the Lib Dem vote doesn't stand up (2008, 2012) so our candidate must be one who can reach out to more voters, and not live in a political comfort zone because they think 'London voted for Ed'.  It is worth noting that in London the Tories and UKIP combined got 1.5m votes: Boris Johnson polled just over 1m in 2008 and Labour has be never gained over 890k votes in any election so far.  From a North London perspective, Labour didn't win Hendon.  So called marginal Finchley didn't vote anywhere near that on election day. Hampstead & Kilburn was much more marginal than people expected, and dare I say the Tories would have come closer if they'd really treated it as a marginal.  Labour also polls more poorly against the Tories when the Lib Dem vote doesn't stand up.  As we - and the Lib Dems - just found, most Lib Dem voters don't like Labour more than they don't like the Tories.

Friday, 8 May 2015

Thoughts on Labour's election loss

1. Watch out for that big fish about to hit you in the face. 
The negative perception of Labour's economic record, stewardship of the economy and public finances was a problem from day one, quite obviously. Labour was punished for that and the issue wasn't addressed effectively and early enough, despite opinions polls consistently warning that this was going to be the case. What’s worse is that we reinforced it by our own hand. By this I don’t just mean Ed forgetting the economy in his most important speech, or the extremely late appearance of the balanced budget pledge in our manifesto. The inner circle dismissed evidence clearly saying that Labour was weak on the money issue as the opinions of resistors who 'thought that way anyway' or 'probably wouldn’t vote for us'. For most people ‘economic competence’ isn’t just about your stance on capitalism, it’s a judgement on effectiveness, on how well you do stuff.  Sure... voters might have liked someone to take action on energy companies, train franchises and banks, but they were also saying that they didn’t want Labour to do it, because we'd just mess it upSo every time we proposed something radical we undermined our own case even further by people not believing we'd be able to do what we said. 

Why wasn't this addressed earlier?  Internal discussion within the party on sensible finances was difficult - anyone who wanted to balance the books was 'right wing' or 'pro austerity.' The whole Blairite fifth column thing put about by UNITE leadership and friends was seriously unhealthy and a sign of the ideological purism which gripped the Party from 2010 onwards from that quarter.   It's fair to move on from Blair, but - unforgiveably - they repeatedly dissed our own record of changing Britain for the better when doing so.

2. Too centralist. 

Ed’s inner circle never really got local government and decentralisation, the stuff at the end was window-dressing. Instead of giving power to people and challenging the Big State trope thrown at us, we talked about devolving skills budgets - hardly setting the world on fire. Jon Cruddas’s championing of decentralisation was effectively seen off and Hilary Benn seemed to lose every single important argument around the Shadow Cabinet table to Ed Balls et al. To the inner circle, an Ed-led government would be transformative by finding that mythical Whitehall box of levers and yanking them. As previous administrations have found out – government from the centre is ineffective and only builds even stronger Whitehall departments. Labour lost even bigger because of the wipeout in Scotland. Our support for the No campaign didn’t have a distinctive flavour because it lacked its own critique of the Union as too Whitehall-based: which is what we should’ve done. We didn’t have that critique because the inner circle wanted a strong Whitehall to tell people what to do.  Labour tends to see centralism as the state expression of collectivism, and a badge of pride.  Most everyone else sees it as control-freakery. 
Too much wonkery doesn't get results

3. Too many wonks in their bubble. 

At times it seemed that Labour was on a personal intellectual odyssey rather than applying for a job to run the country. It was all West Wing box set when the real lessons come from Our Friends in the North. The campaign was too focused on Ed and his speeches, as if an essay on something by him would made people sit up and listen. There is a time and a place for that, but not in the months running up to an election and not – as it seemed – all the time and to the exclusion of the wider team. Ed's inner circle was universally known as cliquey and never at the end of a phone.  Simply put, the esteem they felt for his undoubted intellectual ability was not embraced by the world at large. 

4. Return of envy-based politics? In its search for tactical dividing lines there seemed little nuance to much of our offer. The disastrous Mansion Tax was a panicked headline-grabbing response written on the back of an envelope three years ago: an envelope which was then lost and then found in time for a pre-election Conference speech but with no groundwork or detail worked up in the interim. While the tax was popular in opinion polls, it did so at the cost of Labour looking like we’d arbitrarily cap aspiration. It clumsily invaded people's lives with subjective political judgements about success.  No thought was had about homes just below the threshold. Braver moves like reforming the outdated property tax system were dismissed. Obvious contradictions like how Labour was arguing for localism, but at the same time magically levying a tax on people it considered to be rich in one area of the country and redistributing the money elsewhere, were not thought through and left candidates exposed. The policy should now be consigned to the dustbin, with a lid on it, as should language about ‘bad’ businesses and ‘predators.’ In the end Labour policies sounded too much like a collection of things we were against, rather than what we were for.  What the fuck happened to One Nation as a winning proposition?  It was packaged as an approach but ended up being just a soundbite.   


5. Reality check. It was never going to be great.  I was predicting the Conservatives as the largest party from the start based on leadership and the economy.  The Conservatives also had something to say about the future, as this Nesta chart explains. Admittedly they made life difficult for themselves with a bit of a rubbish campaign - but as Salim, the concierge at work, said to me today: "At the end of the day, you lot were a bit bollocks." Quite.