By Peter Hetherington | 1 February 2013
A war of words has broken out nationwide over which councils feel most unloved by Whitehall. Who’s right?
When the government’s favourite city leader lays into a senior minister, David Cameron should sit up and take notice. Six months ago, Liverpool’s elected mayor, Joe Anderson, was being lauded by senior Tories from Lord Heseltine to Communities Secretary Eric Pickles.
Eschewing the gesture politics of his Militant predecessors in the 1980s, who were bent on confronting Margaret Thatcher’s government, Anderson decided to do business with a Conservative-led administration. He duly signed one of the first ‘City Deals’, heralding a new partnership between a Labour council and the coalition. He spoke alongside ministers at home and in Europe.
But as 2012 drew to a close, Anderson finally snapped. He accused Pickles, with whom he had been on friendly terms, of bringing the city to its knees with his ‘ivory tower mentality’. And in a letter to the prime minister he warned that sweeping cutbacks could provoke civil disorder.
The pragmatic Anderson is alarmed that the impact of town hall cuts will reduce council services to barely a rump of social care, and little else, by 2020.
He is not alone. Council leaders and mayors from Newcastle to Sheffield, Birmingham to Bristol, plus senior bishops, business people and civil society leaders, share his fears.
Newcastle City Council has graphically illustrated the seemingly remorseless squeeze on council funding in urban areas in a colourful ‘heat map’ based on cuts per head of population in local authority areas.
For council leaders in big cities, it provides confirmation of a deliberate shift of resources from urban areas in the North, Midlands and parts of inner London to Conservative shires and suburbs. Consequently, it appears to further widen a regional divide amply illustrated in official regional statistics that show northern regions, particularly, lagging well behind London and the South.
But does it raise the spectre of a disunited country, with run-down inner cities set against privileged outskirts, poor North pitched against rich South – the very antithesis, in short, of the ‘one nation’ ideal that once seemed attractive to Cameron, however fleetingly? Or, as senior ministers maintain, do the map and Newcastle’s accompanying figures present a distorted picture of council funding?
In both Whitehall and those well-heeled southern counties, where Tory councils have long complained of subsidising seemingly profligate northern Labour strongholds, the Newcastle initiative has caused quite a stir.
Pickles appears outraged by the temerity of the council, supported by a clutch of urban authorities, in producing this alternative map of England to underpin a new, if disputed geography. Coloured to show the perceived injustice of a settlement among mainly 152 larger councils, with losers in darker colours and winners in lighter shades, it is designed to challenge Pickles’ recent attack on unnamed critics ‘playing the politics of division’.
He maintained that the hotly contested settlement enshrined an equitable grant distribution – ‘fair to North and South, rural and urban, shire and metropolitan England’.
Many, in all parties, took issue with this assertion. The Conservative-controlled Local Government Association, for instance, thought it unfair to all. It called the additional cuts in the chancellor’s delayed Autumn Statement last December (on which Pickles’ distribution is calculated) ‘unsustainable’. Under Pickles’ settlement, council funding up to 2015 could now be slashed much further – up 5% on previous forecasts to 33%.
But fairness lies in the eye of the beholder. Ditto statistics, and Mark Twain’s oft-quoted observation about the beguiling nature of ‘lies and damned lies’. Critics say Pickles, in turn, has distorted figures to justify a shift from North to South, inner city to suburbia and shire.
What seems clear is that a long-held commitment to fairness, by addressing both the ‘needs’ and ‘resources’ of councils, is being eroded in favour of a cruder, population-based formula. The current system acknowledges that areas under greater social stress, invariably those with lower council tax bases, should receive compensation in the calculation of a grant.
Pickles, clearly fired up by the ‘heat map’, maintains that Newcastle’s ‘spending power’ per ‘household’ of £2,522 will still be over £700 more than Wokingham’s, the Berkshire unitary authority 270 miles further south that is widely held to embrace England’s most prosperous acres.
Newcastle responded bluntly in a report from its director of resources, Paul Woods. ‘Highly misleading,’ he thunders. He says Wokingham loses only £27 for each resident by 2014/15. Newcastle, by contrast, loses £218. ‘We don’t want to compare ourselves with Wokingham, ministers do that – they’re chalk and cheese – and it deflects from the fact that cuts in Newcastle are much higher,’ insists Woods.
Yet, on the ‘heat map’ analysis, the city is by no means the worst affected. Hackney, Liverpool and its neighbouring borough of Knowsley top the list with cuts of £330 per head and higher.
Civil society is being mobilised, with a recent ‘cuts summit’ in Liverpool, attended by senior clerics and a range of city council and business leaders, providing a foretaste of action to come. James Jones, the widely respected Bishop of Liverpool, has spoken of ‘staggeringly steep differences in funding across the nation, making the pain of applying these cuts even more severe’.
Newcastle’s calculations appear to reveal a substantial North-South redistribution of funding from 2010/11 to 2014/15. The three northern regions – the Northeast, Yorkshire & Humber and the Northwest – lost £374m, which, according to Newcastle, is broadly equivalent to the redistribution to the Southeast.
At the same time, annual figures from the Office for National Statistics show London is almost twice as prosperous as the Northeast and way ahead of the two other northern regions as well as the West Midlands. So contrary to Pickles’ assertions of fairness, the latest Local Government Finance Settlement seems to compound an already yawning North-South divide.
True, ten inner-London boroughs figure alongside 15 northern councils in a league table – produced by Newcastle alongside its ‘heat map’ – showing the 25 authorities facing the highest cuts per person by 2014/15. But in many other areas – not least the powers of Mayor Boris Johnson over transport and highways, economic development, regional planning and now housing – London enjoys a range of powers denied other cities and regions.
For instance, figures from the Passenger Transport Executive Group, which represents the five largest conurbations outside London, show transport spending in the capital rose sharply over the past year to £644 per head. This is well over double that for the West Midlands and northern conurbations combined, and three times more than for the Northeast.
Similarly, the surrounding Southeast, the second most prosperous region in an ONS regional league table, benefits substantially from an extensive transport system, with modern rolling stock feeding into the capital. Add to that the strong asset base of many households, through house prices considerably higher than in the Midlands and the North, and the region does appear relatively privileged.
Danny Dorling, professor of human geography at the University of Sheffield, sees this wealth accumulation in London and the Southeast as an ultimate manifestation of divided England. ‘Where you grow up is far more important than it used to be,’ he says. ‘A family in the South will pass on that inherited wealth to ensure a comfortable future (to offspring) but wealth is not increasing in the same way for a family growing up in the North, where house prices and salaries are lower.’
But 30 miles west of the capital in Wokingham, largely a commuter area for London, another picture emerges. ‘People here feel hard done by, with the cost of commuting – rapidly rising rail season tickets – and higher mortgages all leading to low disposable incomes,’ says a senior official.
Wokingham feels badly misrepresented in what has become a war of words with Newcastle City Council – provoked, it must be said, by Pickles.
‘When people say we get too much, I say “we get hardly anything in the first place so there’s not much to take away from us”,’ sighs director of resources Graham Ebers. ‘We are by far the worst-funded council in the country.’
The council, which serves a population approaching 160,000, raises 80% of its own budget and gets a mere 20% from government grant. This represents the reverse of urban areas in the North and Midlands where council tax provides around a fifth of funding, with the remainder coming from formula grant.
With Wokingham ranked as the country’s third least-deprived area, Ebers accepts that any national formula must include some redistribution. ‘I do not dispute an element to recognise deprivation, but the amount of weighting borders on the ludicrous... there’s barely any recognition of the cost of us providing services,’ he laments.
Business executive David Lee, Conservative leader of Wokingham, finds it hard to contain his anger at the very mention of the Newcastle ‘heat map’. ‘It’s all very well places like Newcastle crying foul, getting a bigger cut per head than we have had,’ he retorts. ‘But they continue to spend excessively, they never put any away, they never made hay when the sun shone.’
He says Wokingham is a model of efficiency. ‘We’ve been very badly funded and in the good years we have taken advantage [to get] our house in order. I know Newcastle quite well and I’ve seen the amount of money thrown about. Sometimes they need to stop and ask: “are we spending this in the right way?” It’s as though the world owes everyone else a living.’
But former Newcastle City leader David Faulkner, who now heads the Liberal Democrat opposition, finds this argument hard to stomach. ‘There is clearly a higher level of need in the city in a whole host of areas – children in care, much higher unemployment, and the fact that we’re a regional capital with all the expense that involves,’ he responds.
The city, with a population of 292,000, ranks as the country’s fortieth most deprived area. ‘Do they think we’re inventing our need?’ asks Faulkner. ‘Is Wokingham a city with the responsibility of being a regional capital?’
But he isn’t surprised that senior Conservative ministers are pushing money from North to South. ‘Like it or lump it, that’s where their core support lies.’
True or not, this clearly runs counter to Cameron’s pitch on ‘one nation’ Toryism shortly after taking office. On several occasions, the prime minister went out of his way to stress that the economy was over-dependent on one part of the country – London and the Southeast – and one industry, namely financial services. Certainly, it can be argued that many of this government’s subsequent actions, far from narrowing a North-South divide, have served to further strengthen the capital, and its hinterland.
Boris Johnston, for instance, gained more powers, over housing and the economy, in the 2011 Localism Act. His lobbying influence appears to have no bounds. Late last year, Chancellor George Osborne agreed to underwrite a £1bn extension of London Underground’s Northern Line to Battersea, on top of the £16bn earmarked for the 73-mile west-east Crossrail project and the £6bn Thameslink upgrade from north of London to Brighton.
It will come as little surprise if, next year, spending per head on transport in the capital rises even more than the current estimate of £644, further dwarfing that of other cities.
To be fair, one arm of government recognises that a counter-balancing strategy is needed to improve the fortunes of provincial cities and surrounding regions. Last year, Greg Clark, then a senior minister in the Department for Communities and Local Government, concluded a series of eight ‘City Deals’.
The most ambitious was in Greater Manchester, where ten councils pooled some powers to form a new ‘combined authority’. It includes a ‘revolving infrastructure fund’, which allows the authority to earn back revenue gained from business growth tied to a £1.2bn investment in infrastructure, such as tram lines, other public transport ventures and road schemes.
Clark, now financial secretary at the Treasury, has kept his brief as cities minister. Recently, at a Westminster reception, he waxed lyrical about a ‘revolutionary approach’ to English devolution by changing an assumption that power and budgets were exercised ‘by default in Whitehall’. He enthused: ‘We’ve broken the mould. Now people will see we mean business. We intend to devolve power to the cities because they are very capable of exercising it. The year ahead will be even more exciting.’
Much of his enthusiasm is based on implementing last year’s recommendations from Tory veteran and former deputy prime minister Lord Heseltine. Heseltine proposed that a single, multibillion-pound pot of funding from various Whitehall departments should be devolved either to city-regions, on the Greater Manchester model, or to individual cities such as Liverpool.
With the Treasury due to reveal further details of this process, which significantly, has been backed by Osborne, it seems likely that 39 emerging Local Enterprise Partnerships will be encouraged to bid for funds from this single pot. This implies both winners and losers.
But how does this seemingly adventurous City Deal approach – 20 more towns and cities have since been invited to submit bids – chime with Eric Pickles’ agenda? And will the impact of cuts on cities in the North outweigh any benefits from these deals?
Ed Cox, director of the IPPR North think-tank, believes they will. ‘Cuts falling on local government will have a far bigger immediate impact than any City Deals,’ he says. IPPR North recently published a report from an independent commission of business and council leaders calling for a single pot of decentralised funding to revive flagging northern economies.
Cox says: ‘Just at the point when economic decentralisation is being addressed in a modest way, councils are having to deal with the instability caused by the recent local government settlement.’
Having locked horns with Newcastle, Pickles is now facing a sterner test in Liverpool. Criticism from the bishop is one thing; but facing an incandescent elected mayor quite another. In Liverpool’s City Deal, Anderson pledged to create 20,000 new jobs, build 12 new schools and 5,000 new homes and transform Liverpool into one of the country’s most business-friendly cities. Now he says the challenge of saving £32m in 2013/14, on top of cutting £141m over the past two years, is a near-impossible task.
In his letter to the prime minister, Anderson warned that the savagery of the spending cuts risked creating riots similar to those experienced in England in the summer of 2011.
‘The present level of cuts will have a devastating impact on people and businesses,’ he added, attacking Pickles for ‘living in an M25 bubble’.
Meanwhile, in the Cabinet Office, another branch of government has its work cut out attempting to smooth things over. Working under Deputy Prime Minister Nick Clegg, a small ‘cities policy unit’ has the task of taking forward an ambitious devolution agenda, partly championed by Greg Clark.
In a statement to Public Finance, Clegg placed his City Deal initiative, combined with Heseltine’s proposals, in a wider ‘one nation’ context – namely, creating a level economic playing field across England.
‘This is another step towards a rebalanced economy – devolving budgets puts those who know their city’s needs best in control,’ he asserted. ‘We want to see more ambitious and transformational proposals that have the potential to unlock jobs and growth. We look forward to freeing up more powers for cities to do things their own way. We are freeing up cities to take control of their destinies. Some doubted we’d deliver.’
One observer says Clegg – MP for Sheffield Hallam, after all – is on a mission to deliver new freedoms to cities such as his adopted one. ‘This is personal for him. It’s about legacy. He’s really driving this.’ A source close to the action adds: ‘Ministers acknowledge there’s something wrong with the state of England, but what should be done about it?’
And that, he says, is the burning question. In short, is there a coherent narrative across government to address regional disparities by moving towards the ‘one nation’ ideal of Lord Heseltine and Nick Clegg. Or are two arms of the state pulling in opposite directions?
And where, in this confusion, lies Eric Pickles, the ultimate enigma?
Peter Hetherington writes on community affairs and regeneration. He is the former regional affairs and northern editor of the Guardian, and is a board trustee of the Town & Country Planning Association
This article first appeared in the January/February edition of Public Finance magazine
