What does the Budget mean?
By Urban Forum Chief Executive, Toby Blume
What can we learn from Chancellor Gordon Brown’s eleventh, and probably last,
Budget as Chancellor about Government’s future relationship with the sector
and the forthcoming Comprehensive Spending Review? Here are some thoughts
on what the future might hold and some of the challenges ahead.
The announcement of £80m over four years to support the community sector is welcome
and reflects the close relationship between the Office of the Third Sector (OTS) and the
Treasury. Urban Forum has been lobbying the Government for some time to invest in
community sector capacity building and we’re pleased that this need has now been
acknowledged. Our recent research1 on Local Area Agreements (LAAs) highlighted the
declining investment in Community Empowerment Networks since LAAs were introduced.
Extracting additional dedicated funding for the community sector is no mean feat but it
should be put in context. The amount - £20m a year – is tiny proportion of government
spending and barely scratches the surface of what is probably needed. The amount
crudely equates to approximately £50,000 per local authority area per year and is far
less than the amount previously dedicated to the Single Community Programme.
Nonetheless since this is a dedicated fund for the sector this is a welcome step in the
What will be interesting to see is whether the big spending Department of Communities
and Local Government is able and willing to invest in community sector capacity building
in the next spending round. One of the dangers in having a dedicated Office of the Third
Sector is that all the other Departments assume it is no longer their job to support and
engage with the sector. However I’m certain OTS are as keen to avoid this happening as
much as we are and we must work closely with them in the coming months and years to
ensure that their existence is not seen as letting others off the hook. In part the success
of ‘mainstreaming’ Third Sector engagement and investment will depend on the future
relationship with a Brown administration.
Much of the success of the OTS up to now (and it has been successful in a number of
respects) is based on the close relationship between Brown and Third Sector Minister, Ed
Miliband. If Brown becomes Prime Minister, will his close ally Miliband remain at OTS? My
guess is that he will find himself elevated to a more senior Cabinet post. If Miliband does
leave, the question of who succeeds him will give us a clear signal of the importance
Brown attaches to the Third Sector.
Although in policy terms the budget suggests that there will be a great deal of continuity
should Brown become Prime Minister, it will differ in one important aspect. Tony Blair’s
leadership of the Government, despite accusations of ‘control freakery’, has been
counter-balanced by having a very strong Chancellor. The influence HM Treasury has
exerted across Whitehall is unparalleled in recent times, but I do not see anyone playing
Urban Forum research report on the Impact of LAAs on Community Empowerment December 2006 (see
a similar role in a Brown government. Having so many disaffected ex-Ministers on the
back-benches and a new generation of Ministers (like Ed Balls and Ed Miliband) with
relatively little governmental experience will create a very different climate to that of
1997. Of course then the Government was almost entirely bereft of Cabinet experience,
but it did include a fair number of experienced parliamentarians hungry for change.
Combine this with a future smaller Commons majority and potentially you’ve got quite an
Although the 2007 Budget was fiscally neutral, when you take into account the
commitment to increase – albeit more slowly than before – spending on health and
education and other things like defence, other spending departments are going to come
under increasing pressure to make savings. Will Communities and Local Government
(CLG) be able to safeguard investment in the community sector when under pressure to
reduce spending? Of course that assumes that CLG see the community sector as a
priority and actually want to invest in capacity building. The signs are quite mixed on this
front and their forthcoming Third Sector Strategy should help to clarify their position. The
Local Community Sector Taskforce, (which Urban Forum was a member of), was
established by the Chancellor in the 2004 Spending Review and reported at the end of
2006 with a host of recommendations2. Some of those recommendations are now being
adopted, but the lack of publicity given to it does not instil me with any great confidence.
Lets hope Communities and Local Government do not see the new funding as giving
them a get-out clause to invest further resources in the sector, as this would be a grave
mistake. With community engagement now so prevalent across a range of government
programmes, community sector capacity building is the only way to avoid compromising
the success of these priorities.
I have to say I’m extremely nervous about the prospects for the sector, as a whole, in
the forthcoming Comprehensive Spending Review, which now has been delayed from the
summer to autumn, as announced in the Budget. This delay has led some to speculate
that the Chancellor is planning to call a snap Election in the autumn, though I’m not
convinced by this. The safe money is on an Election in spring 2008, giving Gordon Brown
enough time as Prime Minister to set out his stall to the electorate.
Gordon Brown surprised people with a 2p reduction in the basic rate of income tax,
though as many people have noted, he did scrap the lowest 10p rate to help fund the tax
cut. When you factor in all the changes announced, the reality is not a great deal of
change. It doesn’t affect public spending very much and it’s not going to make a great
difference to most people. The Budget was extremely carefully put together (those
people at the Treasury are awfully clever!) to ensure that it didn’t affect middle and high
earners very much – the crucial ‘middle-England’ who often determine the outcome of a
General Election. The tax cuts surprised me, particularly at a time when there appears to
be a shift in public opinion, and of the main parties, away from tax cuts, in favour of
continued spending on public services. The Budget was also not especially redistributive
(surprisingly since this has been one of the hallmarks of Brown’s time as Chancellor) with
a few notable exceptions like one parent families. Whether or not this means anything
about future policy, or whether it’s simply political manoeuvring in the run up to a
Report from the Local Community Sector Taskforce January 2007 (see
General Election remains to be seen. I’d guess it’s probably more of the latter than a
major shift in policy.
Futurebuilders will be expanded to make investments across wider range of areas and
continues the trend to increase Third Sector involvement in service delivery. The
Chancellor continues to push social enterprise and asset development up the political
agenda, which is welcome, but not at the exclusion of community development work. To
narrow the focus solely to income generation would overlook the vast majority of the
community sector for whom this agenda is never likely to be relevant. In fact investing in
capacity building the wider community sector is likely to increase the number of groups
that are in a position to develop assets and generate income. However I’m not convinced
that they’ll take this long-term view.
Interestingly, the Budget seemed to sidestep some of the thorny issues raised in the
Lyons Inquiry, which was published on the same day. However issues like Council Tax
reform will probably not go away, but maybe they’re something that the Chancellor will
come back to if he moves from No.11 to 10.
The Budget was hailed for its green credentials but environmental groups have been
quick to highlight its limited progress. Gordon Brown seems keen to continue in Blair’s
footsteps with more than a passing interest in sustainable development, but like Blair
seems to fall far short of the kind of social and cultural change that is needed to balance
environment, social and economic factors. If we are to achieve this it seems clear that a
political consensus is needed – having the main Parties point scoring to ‘out-green’ each
other might seem attractive but it’s doing us all a dis-service. Is Brown, or Cameron for
that matter, capable of forging the kind of consensus on climate change and reducing our
eco-footprint that is critical to our long term sustainability? The jury is still out on that
Gordon Brown’s has a reputation for being dour and austere but set that against Blair,
whose empathetic posture has led to views that he’s insincere and has certainly
contributed to declining popularity. Do we want more of the same? Brown is rarely
accused of lacking seriousness.
It’s difficult to draw too many conclusions from this Budget and it’s tricky trying to
distinguish between political necessity and political philosophy. However we’ll all be
waiting anxiously to see what happens with the CSR, succession and the next General
Election and doing our best to help shape policy.