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Letter to the Chancellor on the Comprehensive Spending Review

September 8, 2015

Dear Chancellor,

The Comprehensive Spending Review is a chance to renew your relationship with local government and bring about a much needed correction to the way essential services are funded in Newcastle and across the north.

As you will know, Newcastle, as a city and a council, has faced a difficult five years as a result of disproportionate and unfair spending cuts. The city has lost £151m in government funding over this period, a figure entirely out of proportion with that lost by many other councils in the south of England.

Newcastle has been hit hard by changes to the council funding formula which appear to have been made without any consideration whatsoever to the impact on areas of higher deprivation.

The city was then hit again by a resource equalisation process which perversely sees councils with a higher tax base protected while others suffer further, and hit once more by a system which now seems designed to prevent consideration of adult and child care needs.

The council’s ability to respond to these challenges is limited by the fact that council tax here accounts for just 11 per cent of our overall budget. This situation is simply unsustainable.

It is time you as Chancellor acknowledged that a commitment to austerity without consideration of local need will push councils to the edge of a fiscal cliff.

Once past this point, the knock on effect will be felt by other public sector services, including the NHS and the police, services already facing their own financial pressures.

The threat is particularly severe in child care and protection. The numbers of looked after children in the region have increased and are considerably higher than less deprived areas. The North East has seen a 30% increase in the number of looked after children since 2009 while funding for children’s social care has been cut by over 40%.

The attached formal submission shows what could be achieved in Newcastle through the Comprehensive Spending Review. Issues of particular importance include:

New Homes Bonus
There is an urgent need to reform the New Homes Bonus. The current system funds the bonus through a top slice of local government resources, regardless of need, meaning councils such as Newcastle lose out. Newcastle is a net loser from the scheme and will continue to be so due to the way in which the top slice is removed from the scheme. In 2012/13 the council would have had to build an additional 251 homes to avoid incurring a loss in funding from the scheme.
As just one example, in 2014/15 Newcastle built 654 more properties than Wokingham but were net losers by £3.1m due to the way core funding is cut and the reward allocated.

New burdens
In previous years we have faced up to both cuts in funding and rising cost pressures. Now it has become apparent that there is a third factor hitting council finances in the form of new burdens imposed on local government by a Government who are happy to tell councils what to do but provide little in the way of funding to achieve those aims.

For example, the Summer Budget saw moves towards a National Living Wage and pay awards, but with no indication as to how the public sector will fund this. On the National Living Wage alone, meeting our care obligations will cost the council £20m a year.

Clearly, the situation as it is cannot go on. If the Government fails to address these and other issues raised in this submission, the result will be to reaffirm the view in the North East that this is austerity for the sake of austerity. The time has come to allow Newcastle the chance to grow, in a way which sees no one left behind.

We have worked hard over the last four years and during the recession to protect jobs, investing in the city so we were ready to take advantage of the upturn and secure a better future for Newcastle.

However, despite all of our success, continued cuts to public sector budgets put that potential for economic prosperity at risk and threaten to dismantle the support network available to the most vulnerable.

I urge you to think again about the scale of the cuts to local government and would ask that Newcastle is finally treated fairly in the allocation of Revenue Support grant.

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