Chancellor's red box

Pre-budget briefing: Winter is here

By Patrick Murray 17 November 2017

Patrick Murray gives the lay of the policy land ahead of the 2017 budget next week. As the effects of austerity meet government in disarray over Brexit, he finds few reasons to be cheerful.

Over the summer there was much speculation about the ‘end of austerity’ off the back of the surprise election result. Next week the Chancellor will stand up and give the first budget of this new parliament. The charity sector will be looking out keenly for what this means for them and their beneficiaries.

Usually these sorts of affairs signal a new government’s intentions and are major events. But this feels much more like a mid-term budget than the rebirth of a new administration.

And the mood music is definitely not ‘Ode to Joy’. Budget predictions are expected to give the Chancellor much less room for manoeuvre, in contrast to last year where the Office of Budget Responsibility (OBR) forecasts gave the government a bit of a windfall. The OBR giveth, and the OBR taketh away.

The political pressure is intense for a government trying to navigate Brexit without a majority and having lost two ministers in a matter of weeks. Public sector workers are expecting a pay rise, the housing crisis is growing ever more acute, and the head of the NHS, Simon Stevens, last week made a major intervention referencing a certain figure painted on a bus.

So, as we approach a mid-Brexit, post-snap-election budget, what’s the lay of the land?


A report out last week from the major health think tanks highlighted the cash shortages facing the NHS. This was entirely predictable.

After the NHS Five Year Forward View call for investment was seemingly met by the government, ministers and charities may have been forgiven for thinking health spending was an area that was under less pressure. But the money was coming from other health budgets and, as we pointed out at the time, there was a big dip in funding coming during the middle years of the settlement. The chances were there would not be much available to invest in the preventative community services envisaged.

So here we are a couple of years later, back with the NHS in trouble again.

Given the budgetary constraints any investment in the health service likely has other effects elsewhere. Social care is falling apart at the seams and, since the so called ‘Dementia Tax’ debacle, we’ve seen no political consensus about what to do about this. Yet the desperate need for social care investment was somewhat buried in the calls for money for the NHS. All we have so far is yet another review in the form of a green paper promised before next summer.


Elsewhere, moves to offer something game-changing on housing appear to have been scaled back. Debates have been raging about where to spend—from borrowing £50bn to fund infrastructure for building hundreds of thousands more homes, to more incremental levers like stamp duty tax relief.

Arguments have raged too about Universal Credit—particularly the waiting time and issue of work allowances. Again, much of this is due to historic welfare cuts now starting to hit.

For many charities providing housing for people experiencing homelessness or fleeing domestic violence there are more immediate concerns around housing and welfare. There has been a two-year campaign by the supported housing sector against a new funding model that threatened the funding model of many charities. This bore some fruit as the government announced that the Local Housing Allowance wouldn’t apply to social rents.

But the government has proposed so called ‘short-term’ services—which includes refuges, hostels, and supported housing for people experiencing mental health issues—will now be funded through a ring-fenced pot administered by local authorities. Given the precarious state of local authority finances, many are understandably worried.

Another issue is that this only relates to housing costs—in the midst of this fight many have forgotten about the crippling cuts to the support that is so vital to the people who live in these schemes. In reality, it’s unlikely we’ll see much help sent to councils, who many charities work with, next week.

All of this is a reminder that public spending is sometimes like a toothpaste tube: squeeze one end and it comes out the other side. Our social determinants of health work published yesterday highlights the impact that charity action on social factors—like housing and income—has on health outcomes. And it works both ways: cut social provision, as the government has done for years, and your health costs will rise and rise.

One of the most surprising findings of our State of the Sector work earlier in the year was that the majority of charities thought Brexit would have no effect, or a neutral effect, on their work. But here we are, at the point of what should be the main opportunity for the government to announce new priorities, and Brexit overshadows all.

The government are clearly bracing themselves for choppy waters ahead. Charities will already be braced—they know it better than any: winter isn’t coming, it’s here.