20 | December | 2012

When Tories talk about ‘localism’, what they really mean is that they want local councils to take the blame for implementing this government’s draconian cuts.

Local government accounts for about a quarter of all public spending, and is taking a disproportionate share of the overall spending reductions. The latest announcement is that the Tories now want 70 per cent of local authority income to be raised locally as compared to about half under the existing arrangements. This will clearly penalise poorer areas which have greater needs, less council tax raising capacity, more unemployment and fewer business opportunities… in other words, areas like deprived parts of the north and Midlands which tend to have Labour councils.

It was no coincidence that – in accord with Osborne’s ‘cunning plan’ – Labour councils, found that they would lose proportionately more of their central funding than Tory councils This meant that, following the 2010 GE, Labour councils would be forced to make greater cuts than Tory ones and/or to consider raising council tax higher than in Tory areas… and given the public confusion that exists as to how councils are funded and what councils are actually responsible for… to get the blame. To add insult to injury, the Tories would then be able to argue that Labour councils were either incompetent or were/are deliberately cutting for ‘politically motivated’ reasons, as this blog written prior to the 2011 local elections describes:

Labour councils shed 50% more jobs than Tory areas

…. the Guardian’s analysis … reveals that Labour authorities are suffering the worst budget cuts, with a 7% reduction in “spending power” on average, compared with 5% in Tory areas and 6% in Lib Dem areas….. Last week coalition ministers accused Labour of making political capital out of the coalition’s actions… This came after Manchester announced 2,000 redundancies in what local government minister Grant Shapps called “a cynical move by a Labour council intentionally cutting frontline services and playing politics with people’s lives”…. Labour-controlled councils have issued 39,787 notifications, 30% of the total, while the party controls only 16% of all councils. Lib Dem councils have issued 8,339 – 6.3% of the total when the party runs 7.9% of all authorities.

However, when the fine detail of the government’s £81bn deficit reduction programme was announced, Tony Travers, local government expert at the LSE, said, ‘It’s clearly shifting resources from relatively deprived inner-city areas towards more affluent shires. It’s certainly going to be hard for government to describe it as progressive. All Eric Pickles’s warm words about transitional funds can’t disguise the truth – the poorest neighbourhoods will be hardest hit while the better-off will do best as a result of the choices the coalition government is making.’

Council tax actually makes up only a small portion of the overall money received to provide services. Most of the money comes from central government grants which have already been substantially cut. Councils will again have their spending power cut by 1.7% next year… and given the ‘failure’ of George Osborne to cut the deficit, there will be a further unexpected two years of cuts from 2015/16 and 2016/17.

The discrepancy in funding arises from the fact that the poorest areas are the most dependent on central government funding while wealthy areas that receive a lot in council tax, are getting extra subsidies after the government promised extra central funding to subsidise a freeze in council tax payments. Ironically, Eric Pickles has told MPs that the settlement for next year represents a “bargain” for local authorities, adding that the government would offer support for the third year so that council taxes could be frozen… thus ensuring that wealthier areas continue to be relatively better subsidised.

But on top of these cuts, this Tory/LD government has abolished the practice of redistributing business rates according to the socio-economic and demographic characteristics of an area (as well as an authority’s ability to raise income through council tax). Under the last government, business rates were paid into a central pool and then redistributed to local authorities according to a base line, improbably provided by Wokingham. In this way, poorer areas with their greater demands on public services were given extra help at the expense of richer areas with less need.

So now, under Tory ‘localism’, councils like the wealthy Borough of Kensington and Chelsea, will retain about 50% of their high level of business rates whilst councils in poorer areas, providing for much greater needs, will be proportionately worse off.

However, councils are beginning to get heard. In a joint open letter to communities secretary Eric Pickles… the leaders of Liverpool, Newcastle, Birmingham, Nottingham, Sheffield, Leeds and Manchester local authorities say the scale of anticipated cuts imposed by ministers mean “vital services” will no longer be able to be protected. Birmingham City Council have produced a graph to demonstrate the increasing gap between grant income and their rising costs. They call it the ‘Jaws of Doom’.

http://www.guardian.co.uk/society/2012/dec/18/local-government-cuts-jaws-doom-bite

Birmingham council, the UK’s biggest local authority will see its grant reduce by £332m by 2016-17. ‘Over that period costs will rise by an estimated £273m. That means £600m of savings, a cut of nearly half of the council’s controllable spending. “It’s the end of local government as we know it,” says the city’s leader, Sir Albert Bore.’

This means huge, rapid and painful cuts in Birmingham, whilst Newcastle city council has announced that it is cutting its entire £2.5m arts funding programme as part of a wider plan to address a £90m shortfall in government funding over the three years to 2016, equivalent to 34% of its current budget (1). A spokesman for Bristol city council said it was anticipating having to make £6m cuts in 2013-14, equivalent to 10% of its current budget. It has already made cuts of £55m over the past two years (1).

According to the Audit Commission report, local authorities are becoming financially unviable.

‘… the Local Government Association (LGA) says councils face a potential £1bn shortfall as a result of technical funding change…. Liverpool city council leader Joe Anderson has said this level of cuts will cause riots. Kent county council leader Paul Carter has warned “the tank is running on empty”. And the Conservative chair of the LGA, Sir Merrick Cockell, has called the cuts “unsustainable”.

It is a sign of the desperateness of this situation that Tory council leaders are also speaking out. For example, Sir Merrick Cockell, chair of the Local Government Association, is also the leader of the Conservative Kensington and Chelsea council. In the summer, in response to Ministers putting councils under heavy pressure to raid their reserves to offset the effect of 28% funding cuts from Whitehall, the Tory council leader told the Observer:

“Councils are working hard to shield frontline services from the 28% cut to the money they receive from government. But cash reserves can only dampen the impact, not fill the gap. If councils plundered their reserves to cover the cuts, the cupboard would be bare within five years and there would be nothing left to invest in the growth-promoting projects Britain needs.”

http://www.guardian.co.uk/society/2012/sep/01/council-reserves-will-run-dry

Meanwhile, Eric Pickles, the Minister for Communities and Local government with a reputation for lateness in delivering vital information about next year’s grant, suggests cutting back on the use of bottled water and cutting Chief Executives’ pay. Pickles, has also dismissed library closure protesters as “luvvies”, and urged councils at the weekend to do more to save cash by procuring goods more cheaply, outsourcing back office services, and dipping into financial reserves. What on earth does the man think councils have been doing? Local authorities across the political spectrum have already made billions of pounds of efficiency savings. As shadow communities and local government secretary, Hilary Benn, said: “It is clear that he is living in a world of his own, because he simply does not understand the impact that his decisions on funding are having on the services and local people who use and rely upon them.”

So what will be the impact of councils uniting in their criticism of Osborne’s ‘cunning plan’, ably implemented by Pickles? Will the public come to realise that the closing of their local libraries, after-school clubs, youth services and Sure-start, are down to Tory/LD coalition cuts? Will cuts to those previously protected vital areas such as adult social care and children’s social services be appropriately attributed to this economy-wrecking government?

As the political leaders of seven of England’s biggest cities, representing nearly 4 million people, warn… if current government spending plans are not changed “there will be no money for anything else but social care and waste collection” by the end of the decade. Kate Hollern, leader of Blackburn with Darwen council, said: “These cuts come on top of the pressures and new responsibilities being heaped on us by the government’s reforms of welfare, education and health. The very role of local government is under threat.”

We urgently need to protest that these unnecessary cuts must be stopped and services reinstated. Or is the UK population going to drift quietly into living a third world type of low-waged economy with little access to health, education and social services as the Federation of European Employers suggest?

A remarkable insight has just come, not from the ETUC, but from the EU employers which is worth listening to. Their view is that Britain is steadily turning into a third world country – low pay, low productivity, low growth, low capital investment, heavily indebted, and sinking. Manufacturing has been hollowed out by foreigners, the deficit on the traded goods account has been increasing massively, R&D is slipping, the wage share has plummeted, inequality has ballooned, and an over-dominant economy is steadily financialising the whole economy. To cap it all, wages and even median incomes, driven down by globalisation, deregulation and the growing power of huge agglomerations of private capital able to wield enormous financial muscle in the form of private equity, can no longer provide an adequate base of aggregate demand to keep the capitalist machine going.

http://www.michaelmeacher.info/weblog/2012/12/osborne-should-listen-to-the-federation-of-european-employers/

This government’s priorities are clear to see: