Budget buys a year's breathing space

11th July 1997 at 01:00
Tony Travers untangles the purse-strings attached to last week's promise of Pounds 2.3 billion extra.

David Blunkett's campaign to squeeze more money for education out of the Treasury was successful. Last week Chancellor Gordon Brown poured an additional Pounds 1 billion - Pounds 835 million for England - into school budgets for 1998-99.

The previous government's plans for next year had suggested an increase of a little over 1 per cent. With the additional cash, the year-on-year rise in spending should be closer to 5 per cent, or even a fraction more. In addition, the Chancellor also promised an extra Pounds 1.3bn over five years for capital spending on schools.

Schools have become used to being squeezed for cash. The 1995-96 financial deal was so tight that it produced a nationwide cry of anguish from parents and governors. The Conservatives learned from their 1995 experience. The settlements for 1996-97 and 1997-98 - the current year - were just loose enough to avoid parental revolt. However, the plans the Tories bequeathed for 1998-99 were tighter even than those for 1995-96.

By raiding the contingency reserve the Chancellor has come up with enough extra money to allow schools to survive another year. The Education and Employment Secretary made it clear that he does not want the new money spent on teachers' pay which would mean significant additional cash for books, equipment, minor repairs and new staff. However, if the full Pounds 835m were to be used for purposes other than pay, this would imply only a 1 per cent increase in the teachers' pay bill. In the real world, some - possibly half - of the additional money will be used for the pay rise.

As far as the Government is concerned, teachers' pay is not the only cloud attached to this particular silver lining. The local government finance system being what it is, Mr Blunkett cannot guarantee that councils use the "extra" Pounds 835m for schools alone. Other Whitehall departments - apart from Health - have been told they must live within the plans originally set by the Tories. That is, in most cases they will be allowed an extra 1 per cent on top of 1997-98 budgets. Expenditure capping will not be removed for 1998-99.

This might mean, for example, that education Standard Spending Assessments (SSAs) rise by 5 or 6 per cent in 1998-99, while those for social services or fire increase by 1 per cent or less. Inflation for most services is likely to run at 3 per cent during 1998. In these circumstances, it is hard to believe that some authorities will not consider shifting part of the schools' Pounds 835m to social services, fire or other areas.

To make things absolutely clear, the Department of the Environment, Transport and the Regions' (DOETR) press notice on the Budget stressed that the rise in standard spending for local government would be matched by additional grant that would not be "hypothecated". That is, councils will be as free as ever to spend the Pounds 835m on whatever services they choose: there would be no ring-fencing. In addition, it is just possible some Tory-controlled counties might consider using part of the extra grant to hold down council tax.

It has been suggested that the DFEE will channel some of the extra cash for schools through Grants for Education Support and Training (GEST). Any extra money allocated through GEST would only be handed out on condition that it was devoted solely to purposes determined by the Government. But any significant rise in specific grants would break the DOETR's rule about the additional money being "unhypothecated".

The question of how far the Government will be prepared to go in allowing local authorities freedom to use "schools" SSAs for other services will be severely tested by the settlement - including the extra Pounds 835m - for 1998-99. The question will also be raised by the ending of nursery vouchers. Will ministers be relaxed about the possibility that additional under-fives SSA - previously handed out as vouchers - might not be spent on nursery education?

Education and the NHS are popular and electorally-important services. Social services, the fire brigade and road maintenance do not have such powerful lobbies on their side. What the Government has come up with for 1998-99 is a slightly more generous version of what the former education secretary Gillian Shephard had achieved in the past two years. Labour has been even more willing than the Tories to allocate additional public expenditure by direct reference to public opinion.

If schools' spending rises by 3 or 4 per cent every year while other local authority services have a zero or 1 per cent rise, relatively soon education will overwhelm everything else. Schools will remain open while the streets and local services surrounding them crumble. Such a prescription cannot continue indefinitely, and probably not much longer. Mr Blunkett has bought a year's breathing space, but not much more.

Tony Travers is local government analyst at the London School of Economics

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