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Government cuts don’t add up

September 21, 2012

In the next few months councils across the region will be publishing their budget plans for next year. I’m sure many of them will contain unpopular proposals for cuts to services and jobs. But before we everyone rushes to blame their local authority I thought it might be helpful to explain how we got

In recent years core grant funding to local authorities has been slashed as part of the Government’s deficit reduction programme. Fair enough you might say; councils should take their share of public spending cuts – after all “we are all in this together”.

If all councils had taken an equal share of the pain it might be easier to accept. But, despite promises that cuts would be fair, it turns out that hard pressed areas in the north have suffered bigger reductions in spending power per head of population than feather bedded areas in the south. Some affluent areas even saw a funding increase.

Our figures show that if all councils had been treated fairly Newcastle City Council’s budget would have been nearly £20m higher this year.

These Government cuts will continue to hit us hard in the years to come. We expect a further reduction to Newcastle City Council’s grant of more than £40m by 2016. Taking account of other cost pressures that the council can’t avoid, we are planning how to find savings of at least £30m next year, £60m the year after and £90m the year after that – a total of around £180m over the next three years. That’s a third of our revenue budget, on top of the £70m cuts we have already made over the last two years.

Sadly, it is inevitable that this will mean that jobs and services that are so important to local people will be badly affected.

We have lobbied hard to highlight this unfairness, but the Government is not listening. I will be writing again to the Secretary of State to urge him to stand up for councils in future spending rounds… but I won’t be holding my breath.

But cuts to core funding are not the only problem. I welcome some of the Government’s policies to take functions out of clunky Whitehall departments and hand them to local councils closer to local people. The problem is that quite often it has transferred the responsibilities without transferring the budget needed to make things happen. The end result of that is to pile cost pressures on overloaded councils who are already trying to deal with funding cuts – putting yet more vital jobs and services at risk.

Take the example of providing benefits to people who can’t afford to pay their council tax. The Government quite rightly decided that this was a matter best dealt with by the councils responsible for collecting council tax, rather than a remote government department. But in transferring the responsibility they also announced a 10% cut to the budget. To make matters worse it now seems that the Government Department responsible for local government has designed a way of allocating the remaining grant which will mean that people in areas suffering most from the economic downturn will receive much more than a 10% cut in their benefits! In Newcastle this means we either stop providing support to some of the poorest people in the City who currently get benefits – or we take £3m to £4m from other council services. Either way the council gets the blame.

Concessionary bus fares for older people are another good example. It has long been a legal requirement for councils to operate concessionary schemes for pensioners but the Government has cut the budget by 19% in the current year and has just announced another 10% cut in funding by 2014/15. At the same time bus fares continue to rise as a result of rising fuel prices and this increases the cost to councils of providing free travel. Councils have to provide the service so have to find the cash from somewhere else – passing on the cut to other important services – and getting the blame in the process. The Prime Minister’s commitment to protect concessionary fares needs to be backed up with the money needed to do so.

Sometimes what the Government announces as new money is simply an illusion. The New Homes Bonus grant is a classic example. It sounds like brand new money to reward new house building, but the latest Government consultation paper makes it clear that this is paid for by a cut in the total money available for council services like social care and roads. The Government is proposing to cut £500m next year, £800m the year after and £2,000m by 2018 to fund the New Homes Bonus! What is worse is that the grant scheme is designed in a way that tends to move money from the most deprived and poorest areas of the country to the areas where housing demand and house values are the highest. For Newcastle the net loss from this in 2014/15 could be around £3m rising possibly to around £8m in 2018. The  resulting cut in our core services would be devastating. To put this into context an £8m cut is equivalent to everything that we currently spend on our libraries and parks. This is one sort of ‘bonus’ that we could do without.

Government funding for children’s social care for local Government has already been cut by a massive 32% in recent years and the news that the cut will rise to 43% by 2014/15 is difficult to understand given the need to care of our most vulnerable children. This comes at a time when economic pressures on families mean that children are at greater risk – particular in places like Newcastle where high levels of deprivation mean more children and families receive social care support and more children are looked after by the council. Of course we cannot fail our children, so the council meets the shortfall in funding by reallocating funds from other services – as suggested by education Ministers when we challenged them about the cuts.

At the other end of the age range it is great news that improvements in health care mean that we are all living longer. The proportion of people living well into their 80s and 90’s is increasing rapidly in Newcastle like other parts of the country. But as people live longer they are more likely to call on the services of the council for the support they need to enjoy a good quality of life. Councils are required by law to provide this kind of support to people who really need it, so you might expect that the Government would reflect the growing older population in the allocation of council funding.

But, even though respected independent voices like the Commission led by Andrew Dilnot have identified the issue and urged the Government to act, nothing has been done. So who picks up the cost?

That’s right, the good old local council, by shifting resources away from other services like parks, litter collection, graffiti removal, highways repairs, and all the other things that we know people value – but which aren’t life or death matters or required by law.

I don’t think we have all quite understood the scale of the financial challenge facing our public services and what it really means for our way of life. So far we have only seen the tip of the iceberg – so brace yourselves for the real impact of spending cuts.

And when you do feel the icy blast of the age of austerity, please do remember why the council has less money and why we are forced to cut your services.

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