This is the archive of 2022 District Matters, a column penned by the Leader of Stratford-on-Avon District Council, Councillor Tony Jefferson.
Please note: these columns have previously been published in the Stratford Herald newspaper.
Got a question for Councillor Jefferson? You can get in touch via Ask the Leader .
It is the end of yet another turbulent and volatile year. No sooner had we emerged from Covid than Putin invaded Ukraine. This immediately caused spikes in the cost of energy, food and raw materials.
This was exacerbated later in the year when he cut gas supplies to Germany and, purely coincidentally, a gas pipeline in the Baltic Sea blew up. All of this turbocharged inflation which was already rising and has led directly to what we now refer to as the ‘cost of living crisis'.
So, we have had three years of global crises in a row; 2020 and 2021 it was Covid and 2022 the fallout from Putin's invasion of Ukraine. As if these were not enough, global supply chains have been massively disrupted by China's approach to tackling the Covid pandemic. This exacerbated the fall in global economic activity and increased inflation further.
I am amazed how many people seem to believe that the Government, indeed any government, can make all these pressures go away. What the Government has done is borrow massive sums of money first; to cushion the impact of Covid on households and businesses and second; to cushion the impact of high energy prices on households and businesses.
What was cruelly exposed by Liz Truss' attempt to deliver tax cuts and spending increases on subsidising energy costs was a substantial increase in the cost of government debt. In other words, interest rates increased rapidly and substantially. This became known as the 'moron premium', for fairly obvious reasons.
However, what is very apparent now is that there are real limits to how much the Government, indeed any government, can borrow at realistic cost. This means that if anyone expects a change of government to lead to a cornucopia of spending, I suggest that they think again.
The reason I say this is that, as reported in the Financial Times on Thursday 8 December, the Debt Management Office, which handles debt sales on behalf of the Treasury, will need to sell an average of £240 billion of gilts for each of the next five financial years. There is now almost no room for manoeuvre.
You may think that this is all very remote from us. As a Council, however, much of our funding comes from the Government. If this is reduced or constrained, services will probably need to be cut. The other challenge to us is inflation. If it turns out to be 2% higher than our assumptions, over five years this will cost the Council about another £1.5 million. We all have to understand the context in which we operate.
Of course, what would make everything more manageable is economic growth. A clear strategy for growth is the one policy area that the Government has failed to address properly, except for Liz Truss' spectacular car crash. Whilst we can do little about the national picture, locally across Stratford District we are doing everything we can to encourage growth. Our latest initiative, working together with the University of Warwick and the CWLEP Growth Hub, is to bring together a nucleus of up to 50 leading and innovative businesses from across South Warwickshire to discuss the challenges and opportunities for economic growth. We have worked hard to identify potential companies and, having personally signed all the invitations, I am impressed by the sheer range and variety of innovative and high tech companies we have in the District.
These are the kind of companies that will help to generate our economic growth over the next few decades. Coupled with the development of the innovation campus of the University of Warwick in Wellesbourne, they will give our District a strong foundation for continuing prosperity so badly needed in these challenging times.
Our intention is to build on this first event. The 'Driving Innovation and Growth' summit to be held on 17 February 2023 at the Wellesbourne campus, with a series of further events addressing the main issues and challenges in initiating and sustaining growth.
For us as the Council, this is an exciting initiative. It clearly builds on the links and working relationships we have built with key partners over the past few years. It demonstrates our willingness to be proactive in the interest of everyone in the District.
Finally, as it is the season of good cheer, I have some good news to report. Following our submission of our Investment Plan to the Department for Levelling Up, we have had confirmation that, based on our vision and initiative, the Council will be awarded £456k for 2022/23, and indicative allocations of almost £900k for 2023/24 and £2.3 million for 2024/25. The news was not delivered by a stout gentleman with a white beard wearing a red suit, honest!
I wish everyone a very Merry Christmas and a Happy New Year.
Last month's column set out the economic backdrop which informs our thinking about budgeting. The outlook was not good. Not much has changed.
Against this backdrop we have started our budget process. We have a first draft Medium Term Financial Strategy which basically captures the as is' position with no changes. Using this as a base, we have initiated a 'star chamber' process where we go through every area in considerable depth. We review the budgets for each Head of Service area together with the relevant portfolio holder. The people acting as inquisitors are myself as Leader, The Deputy Leader, the Finance Portfolio holder together with the Chief Executive and Deputy Chief Executive. Each meeting can last up to three hours, so they are pretty thorough.
The impact of Covid means that this is the first time in three years we have followed this process. It has been extremely worthwhile to stand back and look at how we spend the money and review where our priorities need to be.
What is absolutely clear is that there is insufficient money to continue as we are. Substantial savings will have to be made. When we have completed the first round of the 'star chamber' process, we will then review the Medium-Term Financial Strategy to include the changes identified through the 'star chamber' process. At the moment it is unlikely that the savings identified to date will be sufficient, even if we make substantial use of reserves. Obviously, reserves can only be used once so their use does not resolve the underlying issues.
As I write we are awaiting the Autumn Statement on the 17th of this month with some trepidation. We will not, however, receive details of the funding settlement from Central Government until mid-December at the earliest. Only then shall we have a clear sense of scale and direction. Frankly, we know the sense of direction; what we need is an indication of how bad it will be.
What this all demonstrates is how much time, effort and serious judgement has to be devoted to the Council's finances.
There has just been some latest data published on tourism which may provide a surprise to those people who believe 'people will always come to Stratford'.
In 2019 the value of tourism to Stratford-on-Avon District was £476 million; in 2021 this had dropped to £320 million. This is a decline of 32%. The volume of tourists declined from 6.5 million in 2019 to 5.2 million in 2021. This was decline of 20%. The difference between the decline in value and the decline in volume is largely explained by the drop in international tourists. International spend in 2019 was £61.8 million and this had declined to £9.9 million in 2021. This is a decline of 78%. In 2019 tourism supported 8,973 jobs across the District; by 2021 this had declined to 6,621.
I make no apologies for going into this level of detail because tourism is the second largest industry in the District. It is a Cinderella industry. Despite its size and positive impact on the UK and the local economy, far too few people treat it with the seriousness it deserves. This includes some of our residents. For some time, there has been a review in progress into the funding of destination management organisations, in our case Shakespeare's England. Conclusions and money are currently lacking which I think demonstrates one of the key failings of the UK. There is an unwillingness to invest in economic development and support organisations that can facilitate economic growth. We manage to miss so many opportunities to boost economic growth and then wonder why there is no money.
Together with Warwick District Council, the Council continues to fund Shakespeare's England because we understand how significant the tourist industry is to the area.
There has been one very bright spot during the past month. I attended the Stratford Herald Business and Tourism Awards dinner. I even had to give a speech. What the dinner showcased was that many local businesses and people are doing a superb job of adapting, thriving and growing. We need that from the private sector or, unfortunately, we will all end up poorer. There are times when I think some people do not appreciate this. They seem assume that the State will always bail everyone out. This for the birds. We can't afford to do that.
It is amazing how much can happen in a month. If anyone thought we did not live in unpredictable, unstable and volatile times, the last month will have been a ‘wake up call'.
The UK economy is in far from good shape. According to The Economist Intelligence Unit growth this year will be 3.3%, which includes a bounce back from Covid and may prove optimistic. The Government's budget balance is forecast to be negative 6.8% of GDP and the current account balance negative 5.2% of GDP. Interest rate on Government borrowing is now around 4.5% and is likely to rise further.
This picture has some very real impacts and consequences. The scale of the Government's borrowing needs (the negative budget balance) is causing concern amongst investors. Until this year, borrowing was very cheap and very easy. That has now changed dramatically and the increase in interest rates will push the deficit even higher. It has been easy to fund Government borrowing by debt. That is now over. So, the Government is now very constrained in what it can spend. Tax cutting is now likely to be off the agenda and cuts in spending almost certain. I would say at this point this will apply to any Government, regardless of party, for the next few years. What we are facing is the end of a long period where money has been far too plentiful and far too cheap. This has enabled both governments and individuals to enjoy debt fuelled spending. There is now widespread shock that this has come to an end. Individuals, governments and investors are all struggling to come to terms with the consequences. Interest rates will inevitably rise further.
One very obvious consequence is on mortgage rates which are now between 5% and 6%. They could go higher still. The impact of this is starting to feed through into the housing market. Builders are reporting that sales are slowing. There are reports that some developments have been put on hold and we are seeing estates agents advertising ‘new price' and ‘unexpectedly back on the market'. As yet, we have no reports of developments in the District being put on hold but we are monitoring the situation.
The impact of higher interest rates is also being felt in the commercial market where buyers now have the upper hand. We hear of deals being renegotiated or falling through. This directly impacts on some of the initiatives we have been pursuing.
At the District Council we are now faced with three issues:
If there is one piece of better news, it is that our District Council finances are relatively strong as a result of sound decisions taken over the last few years.
Finally, I want to touch on the subject of economic growth. The limitations on the Government's capability to borrow cheaply will put even more emphasis on the need to grow the economy. It is the only way in which we will be able to maintain the level of spending on public services including health.
There was an interesting piece in the Financial Times on Saturday 15 October. It reported a survey of 10,000 people. Where people estimated their annual retirement income, they overstated the figure by 30%. The estimated figure was reported as £21,730, the actual £16,540.
Low economic growth may make this situation more challenging still. I think it is a stark illustration of the cumulative impact of the UK's poor economic performance.
It might make this Council's focus on supporting economic growth in the District much more understandable and, with our ageing population, extremely relevant to their future prospects and financial security.
Energy prices and supply still appear to be some of the main issues. The domestic price cap of £2,500 is very welcome, as is the commitment to do something about non-domestic bills.
Supply issues may be a bit more fraught; the decision by Putin to cease deliveries through the Nordstream 1 pipeline caused an immediate spike in gas prices, since reversed. The constraints on supply and the need to reduce consumption, especially in Germany is likely to cause a recession and it looks as though there will be a need for rationing this winter.
Although we may think that the UK is remote from the impact of the closure, it will have a knock-on impact. Anything that will interrupt supplies this winter, and there are many possibilities, could mean that we get power cuts.
In some ways this could be a blessing in disguise, because it would change the perception of security of supply from an abstract concept to something very real. This could force the UK to have a well thought through and realistic energy policy. Something we do not appear to have had for at least 30 years. Such a policy would recognise very clearly the variability in supply from renewables. There is a clear need for greater investment in nuclear and there will have to be acceptance that we are going to need a significant proportion of energy supply coming from fossil fuels for the next 15-20 years. This will not please many people, but the alternative may be regular power cuts.
The reasons why we have not had an effective energy policy for so long reflects some of the deep-seated issues the UK faces; an inability to think strategically, a reluctance to invest at the necessary scale, and an unwillingness to face down opposition and pressure groups when it needs doing.
The need for businesses to have some relief from high energy prices is important. High levels of inflation are causing real difficulties. The squeeze in people's disposable incomes is really being felt. High energy and increasingly, food prices mean that people will have to spend more on the basics, leaving them less to spend on ‘nice to have' purchases. Pensioners on fixed incomes will also be hard hit. Unsurprisingly this will affect retail, hospitality and tourism, so we could take a disproportionally hard hit locally.
The cost to the Government of providing the support for energy prices will, it is assumed, be met by borrowing. Unfortunately, interest rates are rising so borrowing will be more expensive. There appears to be the first signs that investors are losing confidence in the UK. An illustration of this is that the pound fell to $1.15 last week. (As an aside, when Queen Elizabeth ascended the throne in 1952, £1 was worth $2.80.) This pushes up inflation, which in turn means that the Bank of England may need to raise interest rates more aggressively. Inflation is already having a direct effect on the funds allocated for Levelling Up and the Shared Prosperity Fund. The amounts bid for will not enable completion of the projects. Allocation of more funds may be challenging, so projects will need to either be scaled back or cancelled.
Given the new Government's shift in focus to economic growth, extremely welcome and long overdue in my view, it may well be that the criteria for successful bids in future will change to focus on a clear link to generating economic growth.
The circumstances we face as a District Council will put an even greater premium on thinking strategically, taking difficult decisions and most definitely not ‘kicking the can down the road' and hoping something turns up. It will be a time for a clear-eyed realism about what we can and can't do for our residents.
Well, it's amazing the difference a month makes. It is becoming increasingly evident that the world has changed. The combination of war in Ukraine and a long, hot summer is pushing inflation higher and making the ‘cost of living crisis' far more difficult and expensive with which to deal. What is also now very apparent is that this is not just a short-term blip.
There is an expectation that energy prices will not come down significantly until 2024 and even then, they are unlikely to revert to 2021 levels. I have seen an estimate that offsetting the energy cost increases for everyone for one year would cost £37 billion. This estimate is, I think, already out of date.
To put that in context, the FT on Saturday 13 August reported that the Bank of England's latest forecasts show that debt service costs are likely to be £95 billion next year. This is almost double the current level, before any additional borrowing or tax cuts.
Obviously, some of my previous columns have been far too optimistic.
It is all too easy to focus on our local council, so it is interesting to note what is happening at some other councils:
I could readily list a number of others. The combination of stagflation and rising interest rates will probably uncover more difficult issues at more councils. The general point is that an inept council can end up costing local taxpayers a lot of money. Competence really does matter. Allied to this is the need to be aware of undeliverable promises. For example, Northamptonshire County Council kept council tax unsustainable low and has been wound up.
Very shortly we will be starting the next budget round. We do not expect generosity from central government. Nor do we anticipate using a combination of borrowing and catastrophic investment decisions to take away the likely pain. We will remain realistic and disciplined in our approach.
We are currently in the early stages of developing the South Warwickshire Local Plan which will run through to 2050. The very uncomfortable reality is that, as long as the population continues to increase, there will be the need for more houses. In our current Local Plan that runs from 2011 to 2031, we have to deliver 14,600 houses. I would expect that the new Plan will probably entail delivering more. I would not be too surprised if, for Stratford District alone, this would be in the order of 20,000 more houses. During the creation of the last Local Plan, there was massive resistance to increasing housing numbers. Every Local Plan has to be examined by the Planning Inspectorate. Until the Inspectorate is satisfied with the Plan, it will not be approved. One of the results of the strong but utterly doomed resistance was that we ended up with ‘planning by appeal'. This effectively gave control to developers. It meant development took place in areas where we would have preferred it not to happen.
We have no intention of repeating that mistake.
There are two additional reasons for starting the process early and running it through to 2050. It provides more options, particularly regarding the creation of new or significantly enlarged existing settlements. It also means that we can have early dialogue with the range of infrastructure providers that will need to be involved. Indeed, it has already commenced.
Infrastructure is emerging as a likely key constraint on development. The critical infrastructures are:
This should provide a feel for the complexity of the process of developing a Local Plan.
There will be no escaping decisions on where to put development with which many people will be unhappy. Whilst we will, of course, consult and listen to peoples' views and concerns, a Local Plan will have to be produced that meets the Planning Inspectorate's requirements.
Pretending this is not the case is, as I said earlier, folly. Anyone who pretends otherwise is disingenuous. In my view, facing reality and setting out the stark options for people, knowing that many people will find them unpalatable, is what political leadership is all about. Telling people what they want to hear is all too often an unsustainable fantasy that usually only make things worse.
Last month I went to visit friends in South Africa. One of the more interesting experiences was regular power cuts. Anyone who doubts that the most important factor in energy policy is keeping the lights on should experience regular power cuts. Keeping the lights on will not come cheap! The electricity grid is estimated to require investment of £54 billion to adapt to the changing way electricity is generated and used. Another £2 billion will be needed to restore the Rough depleted gas field off the east coast of England to its use for gas storage. Anyone expecting energy prices to revert to their pre-crisis level is going to be disappointed.
There are a couple of other interesting points on energy. The first is that we are now exporting electricity to Europe in a reversal of the normal flows. The second is that energy rationing in Europe this winter cannot be ruled out. This will have knock on economic consequences for the UK.
This demonstrates just how much the world has changed in a very short space of time. We face greater uncertainty, unpredictability and far more challenges than we thought were on the horizon less than a year ago. Inflation has taken, and appears still to be taking by surprise, far too many people who should have known better. We are struggling to bring it under control. The impact can be seen daily in rising prices.
At the District Council we are far from immune to inflation. Our biggest single cost is salaries and associated costs. We had budgeted for a 3% increase; most councils have budgeted for 2% but we decided to be prudent. Unfortunately, I see from today's paper, the FT, that public sector workers will be offered a 5% increase. The extra 2% will cost us about £1.5 million over the five years of next year's Medium Term Financial Plan. There is no guarantee that the settlement will not be higher than 5%.
This will highlight the tensions between taxation and spending. With tax at almost a 70 year high, it is unsurprising there has been a backlash against high taxation. The other side of the coin is that spending will have to be reined in or cut. It simply is not possible to have low(ish) taxes and high spending on a sustainable basis. Far too many people seem to subscribe to the Johnsonian view that one can both have one's cake and eat it. This is a fantasy!
What exacerbates the tension in the UK is our abysmal economic performance over the past fifteen years. The Economist in June published an article entitled “Britain's real problem." Key points were:
Unless our performance improves, it is difficult to see the UK being able to afford, or willing to pay ever higher taxes to support the public sector it has. We currently rank 28th in terms of GDP per head. We are nowhere near as affluent a nation as we would like to think.
One of the interesting asides I picked up at the latest Local Government Association Conference I attended was that Germany spends eight times as much on economic development as the UK. Germany ranks 19th in terms of GDP per head. I wonder why?
Whilst we cannot do much about the national picture, we are determined to do everything we can to create and shape a prosperous future for our District. Growth brings with it more and better jobs and increased tax revenue. The price is more development. The choices, however, are pretty stark; either increased prosperity or slow gentile decline until it's too late to recover.
Much of the time and energy we spend on cajoling, persuading and convincing key players to invest in the District goes unseen until the final stage. It is this preparatory work, however, that delivers the goods. We make it very clear that we are “open for business".
The final two sentences from The Economist article put the picture better than I could: “If Britain is to avoid a bleak future it must grasp reform. That will require a once-in-a- generation show of political courage, persuasion and policy ingenuity. Just like four decades ago, there is no alternative."
Actually, there is. We can pretend it will all go away. But it won't.
Certainly, a challenge for the next Prime Minister and his/her team.
This month's District Matters contribution is from Cllr Ian Shenton, Climate Change Portfolio
Climate Change – The Elephant is now in the room
With the war in Ukraine, petrol and diesel prices, cost of gas, the cost of electricity, food prices rising, talk of inflation hitting 9% or more, and the Queens Platinum Jubilee; amongst the conversations in the background, the elephant looms. You may not see it, but it's there in the room, and its name…… Climate Change. Everyone knows it's there and happening, but it's somehow slipping down the list.
Climate Change is not going away, and we must all play our part if future generations are going to be able to continue enjoying this beautiful planet. We experience longer hotter summers, wetter winters and when it rains, it rains for longer causing floods. This will get worse if we do nothing, crops will fail, trees will die, our lands that were full of biodiversity and flowers will become barren, sea levels will rise, the oceans will become lifeless cess pits, food will become scarcer, and health problems increase for everyone as a result. This is obviously a Domesday scenario, but it could happen and sooner than you think.
To play your part is easy, think reduce, reuse, and recycle.
Based purely on the last six years, we could see the increase in temperatures rise by 2°C before 2050 and to 3°C before the end of the century according to the IPCC, our own Climate Change Committee, the United Nations, the International Energy Agency.
At COP26, in Glasgow last year, world leaders declared that they were accelerating their programs on climate change, they would be carbon neutral by 2050 (or later) but before the ink on their commitments was dry, some were downgrading them. China and Russia didn't even bother to turn up.
It's down to ordinary people like ourselves to do something to reduce, reuse and recycle. If possible, try and turn the thermostat down by a degree (and possibly turn off in rooms you're not using, along with the lights), only buy enough food that you will use, don't leave the tap running whilst brushing teeth and avoid over packaged products. If it's repairable take it to one of the Repair Cafes that are springing up, if it works to a charity shop or to the reuse facilities at our tips.
Analysis of the contents in our grey bins shows that much of it should be in the blue or green bins or is food waste. This is where the new 123+ waste collection comes in later this year:
If we recycled better and unrepairable small electrical items were put out separately on collection days, the grey bin might not be full even after three weeks. This is exactly why we are changing the collection of residual waste from the 1st August to every three weeks.
Everyone must play their part and reduce, reuse, and recycle. Doing this will reduce the amount of waste going to landfill, might save you money and is good for the planet.
If you think Climate Change is bad now and getting worse then imagine just how much worse things will be for all of us if the climate is allowed to spiral out of control.
For future generations sake we must all do our bit for the planet.
Ian Shenton FCCA
Climate Change Portfolio Holder
There's a storm coming. That seems to me to be the only way to describe what appears to be coming down the track for us at the moment. Inflation is raging and projected to get above 10%, a level unheard of in a generation. The economy seems to be heading for stagnation, if not outright recession. Far too many people believe that the Government will protect them from the consequences of these difficult times. This is not facing up to reality.
Energy prices are set by world markets and the Russian invasion of Ukraine, sanctions and the Russian response are making the situation worse. I have heard projections that the energy price cap will increase by another 40% in the autumn which gives total increase of over 100% in about six months.
Food prices are also increasing rapidly; the war in Ukraine has closed all their Black Sea ports making exports of food difficult. Unhelpful weather in other parts of the world is exacerbating the situation. It is interesting that in the 21st century we are back to having to keep a close eye on the quality and quantity of harvests and the state of the weather.
Both energy and food are basics. The impact of price increases in these will be felt most heavily by the poor and those on fixed incomes. Obviously, this will impact people on benefits. Pensioners, however, may also be badly affected. The days when a great many pensioners were on index linked final salary pension schemes are fading rapidly, except in the public sector. (It is interesting to note that the last reported figure I saw for the total deficit on public sector pension schemes was a mere £2.4 trillion). Inflation at 10% will rapidly eat into the value of pensions. As a District our age profile is skewed to the elderly. Inflation will, therefore, bite hard locally.
I would expect to see an increase in people contacting our Council as the first port of call when they hit difficulties. Our teams will do what they can to help, but our capability to provide a great deal of direct assistance is heavily constrained by our budgets. Central government provides funding support for dealing with specific issues, such as Syrian or Ukrainian refugees, but less so for general needs. This is not a criticism of support for refugees. It is merely pointing out the way things are.
At some stage we may have to make difficult decisions given our scarce resources. For example, do we prioritise helping those people hard hit by inflation or do we prioritise tackling the climate emergency? This is not a choice most people would want to make. We will doubtless be criticised by many people who would run a mile if faced with the need for such decisions.
Interest rates are also on the rise. The uncomfortable truth appears to be that almost all central banks are well behind the curve when it comes to dealing with inflation. They have hesitated for far too long in putting up interest rates and ending quantitative easing. (In simple terms this is the equivalent of printing money). The result is that they are probably going to have to increase interest faster and they will end up higher than would otherwise have been the case. There are serious commentators in the USA who think the Federal Reserve may have to increase its discount rate to 5-6%. The Bank of England may be forced to follow suit. Many people appear slow to learn that ducking tough decisions in an attempt to protect people usually means that it just postpones the inevitable and makes things worse.
This may not be a good time to take on big levels of debt. Those with existing high levels of debt may find life becoming more challenging. This may have serious repercussions for the housing market.
Despite the increasingly bleak outlook, we are continuing our efforts to support economic growth and business development in the District. Recently I visited the Porterbrook Rail Innovation Centre at Long Marston. They have some serious plans for investment and development of the site. I reassured them that we would do everything we could to help.
We also had discussions with a developer who has some interesting and appropriate ideas for development in Stratford-upon-Avon. We will attempt to make these a reality.
Our aim is to cushion the impacts of national trends by being proactive locally. We are focussed on job creation and encouraging prosperity.
Last week we were able to support our first Ukrainian refugees. The story they told had a profound effect on our customer services team dealing with them. As one said, we see the pictures on the television, but meeting and talking to individuals has brought the stark reality home.
On a more general point, when I go to work in Elizabeth House, I see more people queuing up to see the customer services team for help, support and guidance. Perhaps it should not be a surprise.
The war in Ukraine has brought home just how fast the world can change and how strategies that appeared to work suddenly have to be turned on their head. I think Europe has, collectively, had to do just that. We have been reminded that the world is not necessarily a safe place.
Far too often people either fail to notice, fail to understand or, quite simply, do not want to acknowledge how much things are changing. The result is that they continue with strategies and policies that no longer meet the needs of the changed circumstances. Arguably the recent decision to build more nuclear generating capacity falls squarely into this category.
We have already seen one manifestation of the changing world. The completion of the Materials Recycling Facility (MRF) is now delayed by 2/3 months. Given all the issues in supply chains and the labour market, we are not counting on there being no further delays. This will have implications for the waste collection and recycling service which will inevitably push up costs.
On the plus side, there was a photoshoot almost two weeks ago to celebrate the start of demolition work at Swans Landing, the first phase in the redevelopment of the Canal Quarter. This really is a milestone that has been a long time coming. It reinforces one of the trends we are seeing that, even when planning permission is granted, it does take time for projects to start.
What we are also seeing is, in some instances, a reluctance to accept the legitimate and realistic constraints we want to place on projects to ensure substantial benefits for the District. Negotiations can become protracted and a little fraught. We do, however, stand our ground. We also have proposals from developers which simply do not meet the best interests of the District. Once again, it leads to more fraught and time consuming negotiations.
It has to be remembered that planning applications cannot be refused on a whim. There have to be valid planning reasons to do so. The fact that local residents, however many there might be, do not like a scheme is not a valid planning reason for refusal. Planning is not a popularity contest.
There is one initiative we have taken this year that has delivered excellent results. The District Council received £1.227 million in additional resources grant to provide support to businesses. We worked closely with the Coventry and Warwickshire Local Enterprise Partnership Growth Hub to target companies that could deliver real benefits. Together we helped 39 businesses, created 135 jobs and safeguarded a further 703 jobs. Businesses all across the District were helped. It demonstrates what can be achieved by the District Council with a relatively small amount of money if it is carefully targeted.
It is good to see that the fine weather is bringing more and more people into Stratford. I am told that this includes international tourists and, even better, I am told that they are spending money. We also need to remember that tourism is an activity that happens across the District, not just in Stratford town. We also need to remember that it is our second biggest industry. It has a substantial impact on the prosperity of the whole District and the success of all our High Streets.
Finally, and I know I have mentioned this before but I do want to reinforce it; we have a strong Cabinet team and a strong officer team. What's even more important, we work closely and openly together. Although the District faces uncertain, volatile and challenging times, I have confidence that we are in the best possible position to ride out the inevitable storms.
The last month could be described as ‘eventful'.
The war in Ukraine has greatly exacerbated trends that were already present. Inflation is rising rapidly and the delusion that it is only temporary has been dispelled. It now appears very realistic to expect high inflation to persist well into 2024. The picture is now fraught across a whole range of goods:
It is an understatement to say that none of this is good news. Many of these increases have not yet fed through to customers' bills but inevitably they will. The sheer scale of the price increases will make it very difficult for any government to offset all the pain. The fact that these are unlikely to be temporary increases in price makes the challenge that much greater.
The Institute for Fiscal Studies last week outlined three challenges for the Chancellor:
There is now a growing recognition that we appear to be facing a period of ‘stagflation', a combination of inflation and low economic growth. This comes after the financial crisis of 2007/8, the UK's decision to leave the EU and the Covid-19 pandemic pushed up government borrowing. With public sector debt at around 100% of GDP, the scope for additional borrowing is somewhat limited. This is further exacerbated by all the main central banks being way behind the curve in raising interest rates to tackle inflation. So, expect interest rates to increase far more than most people anticipate over the next 18/24 months.
What these shocks have also meant is that what were relatively clear policy positions are now being challenged:
There are always trade-offs to be made in deciding on policies. In the case of energy, the tensions are between security of supply, price and environmental impact. There is absolutely no doubt that if security of supply is threatened, and that means the lights might go out quite literally, then that easily will become the highest priority.
One of the most demanding challenges in running any organisation, and Councils are no different, is making decisions when considerations are pulling in different, and potentially opposite, directions and when there is uncertainty and volatility, as there is now. The challenge is to take a balanced view, and a view that balances not only the current situation but has a clear eye on the future. It is far too easy to ‘fix' a current difficulty and then realise that it has caused even more problems later.
Of course, one can never see Governments making this mistake.
Some things, however, are very clear. We are in challenging, unpredictable and volatile times. This means that we have to stay very alert to changes, consider different viewpoints, engage in serious debate to test issues and possible responses, and not be afraid to take tough decisions. This will include changing direction when the world has changed to the extent that the previous direction is no longer appropriate. I think that, as a Council, we are as prepared as we can be for the challenges we face.
There is one very unfortunate reality that will hit us all for some time to come. We are all going to be poorer, and there will be no escape. Expectations that the Government can bail everyone out are, given the sheer magnitude of the challenge, misplaced. We are all going to have to face an uncomfortable reality.
At long last the Levelling Up White Paper has been published. Over its long gestation period it has moved a long way from the idea of wholesale reform of local government. This is not terribly surprising given the backlash the attempts made last year generated.
The intention behind the White Paper is to tackle the stark geographical inequality within the UK. It characterises previous policy failures to do this as a lack of:
Forgive the cynicism but we have had more than thirty years of governments of all descriptions trying to address this problem. This appears to me to be the first time that the issues that need to be tackled and the levers that need to be pulled have been properly addressed.
Underlying this approach is the desperate need to improve the UK's economic performance. Since 2007 the improvement in the UK's productivity has been extremely weak. With all the challenges we now face, this is the year this lack of performance begins to bite.
If these proposals are really driven through, it will mean that local leadership will have to rise to the challenge. There will need to be a much clearer focus on the strategic long term view, based on at least a ten year time horizon. I cannot help but think that this will mean making some challenging and probably unpopular decisions in the face of inevitable protests.
In the feedback we received to the public consultation on the District Council's budget for next year, one of the pieces of feedback that horrified me was “people will always come to Stratford." This is the kind of short term complacency we cannot afford. We need to invest now for the benefit of future generations. To do this we will need District Councillors who are prepared to provide real community leadership and not just ‘bend with the wind' every time there are protests, in reality, by a small minority.
As Andy Street, Mayor of the West Midlands, put it: “The more ambitious [we are] the better." We are certainly ambitious. We have two areas of development of potentially international significance; the World Shakespeare Centre and Wellesbourne Campus/Airfield. The amount of time and effort we have put, and are still putting in, to make these a reality is huge. The prizes will be well worth it. We also have one other area of development that is of merely national significance, the Porterbrook Rail Innovation Centre at Long Marston. Not bad for a rural District Council.
Indeed, we made a presentation to Andy Street a couple of weeks ago about these projects and our initiatives. The feedback we have had is that he was impressed.
This is very important because the West Midlands has been identified as an area that will be at the forefront of devolution. It will serve as a model for other Metropolitan Combined Authorities in line for a ‘trailblazing' deepening devolution deal. As yet there is no understanding of what that will mean in practice.
I should remind everyone that we are a non-constituent member of the West Midlands Combined Authority (WMCA), as is Warwickshire County Council.
I anticipate that a ‘deepening devolution deal' will mean that the WMCA gains power, influence and that increasingly financing and resources will be channelled through it. Given the scale of our ambitions and the investment needed to underpin the likely shape of the South Warwickshire Plan through to 2050, this can only be to our advantage.
Many people may find what I have said uncomfortable. If we are to shape a very positive and exciting future for the District, however, we will need an organisation with the scale, resources and ambition to help us achieve it. I think that the WMCA is therefore ‘the only game in town.'
This really is a time to seize the day and our opportunities. We intend to do just that.
We start 2022 with Covid still with us in a very significant way, although we may now be passed the worst of Omicron. Nevertheless, the Covid pandemic has had a significant impact on us all.
Indeed, that is one of the reasons why 2022 is shaping up to being a very challenging year. For us all there is the increasing challenge of rising inflation. The Consumer Price Index in November had risen by 5.1% in a year and the Retail Price Index by 7.1%. There appears to be no end to inflation in the near future. Energy prices will be a worry for many people. The latest projections I have seen indicate that the energy cap for 2023 will need to be £2,400 a year. This is about double the current level. This increase alone would add over 2% to the inflation measures. There is much speculation about how these increases can be offset. The very brutal truth is that the prices have to be paid and either consumers will pay or taxpayers will pay.
What is clear is that there will need to be a measure of protection for those on the lowest incomes, because, for them, increases of this magnitude are clearly unaffordable.
The final strand of pressures on people will be increasing interest rates. This has already commenced. There are projections by U.S. investment banks that the Federal Reserve, the USA equivalent of the Bank of England, will increase interest rates 3 or even 4 times during 2022, and there will be a further 5 increases in 2023. It would be unrealistic not to expect a similar pattern from the Bank of England. So, by the end of 2023 UK base rates could be 2-2.5%. In other words, that will be an increase of 2% or more from where they are now.
All these pressures will be very challenging for people, but it is likely to be the reality we face. Having said that, there is one big unknown. How are people going to react? It is many years since inflation has been at this level. It is now almost 15 years since interest rates dropped to low levels and then ultra-low levels. For a great many of our residents 2022 will be a whole new experience, and not a pleasant one. I have no crystal ball but we will be watching how things play out very closely.
All the above matters to us because we are in the throes of setting the Budget for 2022/23 and outlining the Medium Term Financial Strategy through to 2026/27. Once again the Government has only provided a one year settlement so the 5 year time horizon is uncertain. Our provisional Budget has been developed, therefore, against the backcloth of very considerable uncertainty. We are doing everything we can to protect services in the short term until we have greater clarity on the longer term picture. We approved the draft budget on Monday 17 January and it is now out for consultation.
To give you an idea of the scale of the uncertainty, for 2022/23 we will receive £3,803k in New Homes Bonus and £4,586k in business rate retention. Taken together these represent 45% of our base Budget. We know that New Homes Bonus will be cut to zero next year and we estimate that business rate retention will be reduced to £2,147k. We do expect there will be some compensation for these reductions but how much remains unknown.
There is, however, some good news to end on. We received £1.2m from the Government because we had spent 100% of our original allocation of grants to help businesses during the pandemic. Working very closely with the CWLEP Growth Hub, we targeted the money on businesses that had a post Covid growth plan, that were looking to diversify or expand their businesses and which were seeking to create local jobs for local people. By the time the scheme closes on 31 March, it is expected that in the region of 50 jobs will have been created and many more safeguarded as a result of this work.
This also demonstrates the advantages of close working relationships with other bodies. The Growth Hub provided knowledge and a level of expertise we do not have within the District Council. I am aware that many people wonder why we spend so much time and effort on external bodies. These results provide everyone with the clear answer.