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Cuts analysis highlights north/south divide

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LGC’s essential daily briefing

A new analysis of council spending by the Institute for Fiscal Studies has caused quite a stir this week.

Two figures jump out: spending by local government in Surrey and Hampshire has fallen by just 0.6% and 1.3% respectively. Overall county areas (the IFS has combined spending by counties and districts in the shires) reduced spending by 12.5%, compared to a national average of 22% and 31% in London boroughs.

Read LGC’s full analysis of the IFS’s figures here

Regionally, the differences are even starker. While councils in the north of England have reduced spending by an average of between £200 and £320 per head. In the south east the figure is just £75 per head.

Some will point to the historically high level of grant received by London boroughs and metropolitan authorities to suggest they had more capacity to cut. Others will maintain that historic funding levels were related to the need of their population. What is undeniable is the correlation between the proportion of a council’s income that came from grant at the beginning of austerity and the level of cuts they have made since.

While this is not surprising the complexity of local government finance and the myriad historical decisions that can impact on a council’s present day financial health has made it difficult to compare the impact cuts are having on different councils. As the National Audit Office has noted the Department for Communities & Local Government has not been monitoring the impact of cuts. Of course no data is ever perfect but in this context the IFS analysis, which is part of a new programme of work on local government finance, is an extremely useful addition to the debate.

The District Councils’ Network said the figures restated the “by now familiar trajectory of local government spending since the 2010 spending review”. Combining county and district spending areas could mean that county councils, many of which have high levels of spending power, have not had to reduce spending as much as other upper tier councils, or, more likely, it could mean their spending reductions have been balanced out by districts making relatively small reductions or even increasing spending.

Asked to comment on the IFS analysis, and the huge variations it has exposed the DCLG trotted out is usual disingenuous line about councils having £200bn to spend over the course of this parliament, a statement of fact that is meaningless without any consideration of the cost of what they are being asked to deliver. However, while the spokesman defended the four-year local government finance settlement that runs from this year to 2020 as “fair” there was no mention of previous settlements. The four-year settlement introduced a new method for applying cuts which took into account a council’s total income, rather than salami slicing grant as happened in the last parliament.

While this analysis is illuminating, there are obvious limitations. It tells us nothing, for example, about how the quality and availability of services varies between places. As work on the fair funding review gathers pace this question will need to be answered if local government is to start the new world of self-sufficiency on a more equitable footing.

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