Jonathan Werran, chief executive of Localis, reflects on what the Spending Review means for local government.

Last week physicists posited the Black Hole Universe theory for the creation of our universe. This posits that instead of our universe emerging from a Big Bang singularity of infinite density, our universe instead arose from the huge gravitational collapse that generated a black hole, and the rebound of immense amounts of crunched matter down stored within it, like the release of a heavily suppressed spring. In a Black Hole Universe, our universe is not generated from nothing, but we are instead repeating an endless cosmic cycle of life and death. Poignantly, the event horizon at the edge of our universe – from which light cannot escape – would prevent us from ever seeing outside to the parent universe from which we sprang.

Such cosmic musings seem a good way to enter today’s spending review announcement. A vast black hole of national debt of £2.8tn or nigh on 95.5% of GDP. A crippling light sucking £110bn plus debt interest payments that outstrip the combined day to day revenue spend of the Ministry of Defence, Home Office, Ministry of Justice, our dear own Ministry of Housing, Communities and Local Government (MHCLG) and the Department for Transport. Two decades of lost growth and a quarter of a century since the last UK budget surplus.

With this as a gloomy galactic backdrop, is there any light to escape this sort of Black Hole tunnel? Well, in a manner of speaking, there was some rays of light for local government that escaped from the spending review event horizon.

Local government and the local state will take some initial heart from the central thrust of the spending review, especially the promised land of multi-year settlements, improved needs assessments and simplified funding landscape to return local government to a sustainable financial position. This will provide the sector with greater certainty in long-term financial planning it has been yearning for.

The review promises an increase in funding available for adult social care of over £4bn in 2028-29 compared to this year, but until we have some fix on long-term funding of social care upon completion of Dame Louise Casey’s review, we will have to reserve judgment on the sustainability of local public services.

Certainty is a virtue but does not in itself plug the funding gap local government finance directors must hope to close nor the expectation gap of residents paying more each year in council tax for fewer visible benefits. Indirectly, revenue limitations on other departmental areas such criminal justice and police, flood defences and transport, will also have a direct knock-on impact on place across the spending review period.

Angela Rayner has secured a big win for affordable and social housing with a £39bn funding boost over the next decade. The quantum is not big enough on its own to make the sort of generational shift in housing provision we saw in the immediate post war era, but in the circumstances, and with an extra £10bn for financial investments through Homes England to crowd in private investment, it is a highly creditable bit of spending review negotiating by MHCLG in an edgy high stakes poker game in which the Treasury holds the card.

Beyond this, and as Localis’s recent report ‘New Stable’ suggested, there is a similar amount available from surpluses in the Local Government Pension Scheme, some of which could be safely directed to invest in critical local and regional infrastructure, which should by rights also include affordable housing.

In respect of the new changes to the Treasury ‘Green Book’ and place-based investment cases, again we will have to pay attention to how many billions of projected capital expenditure escape from the pages and into the wild to help pump up and provide long-neglected regional infrastructure, energy and housing schemes. The revised ‘Green Book’ will favour investment in particular parts of the country rather than where it is easiest to secure return on investment, and is potentially bad news for place leaders in London and the greater South East.

Tellingly, we also had it confirmed that integrated settlements will be expanded from the Greater Manchester and West Midlands trailblazers to five further Mayoral Strategic Authorities in the North East, West Yorkshire, South Yorkshire and Liverpool City Region as well as to London from 2026/27. With this single flexible pot f or growth and public service priorities the default setting for two-in-five people in England, a new era for place-based reform could be in the making.

The dog that didn’t quite bark in the night was the modern industrial strategy paper, which we can now expect in a fortnight. How the gears of this will mesh with the integrated settlement and other revenue levers, let alone newly announced cashpot, the £240m Growth Mission Fund, to fill in black holes of local authority capacity in areas such as planning and economic development is a serious question in need of an answer as swift as the speed of light.