Financial burden of riots will be crippling.

Recent widespread disturbances are placing a heavy financial burden on individuals, police and insur

As businesses in cities across the UK prepare for another night of chaos, figures are constantly under revision in an attempt to predict the cost of the riots.

On Tuesday, £100m was put forward as an estimate. That was before Manchester and Salford, amongst others, witnessed serious overnight disturbances. From looted shops and street fires to a massive increase in police numbers, the costs are escalating.

As it stands, legislation dictates that the police authorities must meet the costs of rioting under the Riots (Damages) Act 1886, which specifies that local police authorities must compensate victims where damage has been caused by people "riotously and tumultuously assembled".

Although some police authorities are insured against such events, whatever costs not covered must be met by police budgets. In light of the policing budget reduction as part of the public spending cuts, this signals serious concerns for the Met in particular. Reassurances are now being sought to ensure that front-line services including policing, fire and ambulance services will have everything they require to deal with ongoing disturbances.

As well as the immediate outcomes of the riots, longer-term impacts on services such as tourism should not be overlooked. Shadow business minister Chuka Umunna has said that the riots will have a seriously detrimental impact on Britain's economic recovery, particularly on small businesses, many of whom will be forced into bankruptcy. The service sector, which makes up around three-quarters of total UK GDP, grew by just 0.2 per cent over the last quarter. It has been "massively dented" by recent events, according to the Labour MP.

The Association of British Insurers (ABI) have made it clear that insurers are working as quickly as possible to deal with claims, despite limitations such as access to dangerous buildings and crime scenes. The organisation is urging people to contact their insurer immediately in order to check what they are covered for and arrange help. Nick Starling, Director of General Insurance and Health at the organisation, said: "We have every sympathy for residents and business owners who have suffered damage to their properties. This is a time of enormous stress for them".

Comments over what the social impacts of the riots have been prolific, many of them making links between the coalition's drastic austerity measures and the ongoing implications of these, particularly now in light of the past few days. Mary Riddell points out the deep social cost of high unemployment:

If there are no jobs for today's malcontents and no means to exploit their skills, then the UK is in graver trouble than it thinks. Mr Osborne may congratulate himself on his prudence, but retrenchment also bears a social cost. We are seeing just how steep that price may be.

 

Tess Riley is a freelance journalist and social justice campaigner. She also works, part time, for Streetbank, and can be found on Twitter at @tess_riley

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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR