The Government is contemplating another huge spending cut to the most deprived communities in England and no one seems to have noticed. As part of his localism agenda, Eric Pickles has begun an under-scrutinized consultation, snappily entitled the Local Government Resource Review. Unsurprisingly for a review of local government finance, it hasn’t made national headlines but this overlooked review has the potential to be more divisive and explosive than any other part of the Government’s agenda. At its heart is the potential to end, or drastically reduce, the redistribution of resources from prosperous areas to the less affluent. At present, business rates are collected by councils which pass them to central Government to be pooled and redistributed based on need. The review suggests quite simply that this should end, potentially leaving areas to sink or swim largely on the income they can generate.
Pickles says the purpose is to devolve decision making over resources locally, but the key question is “what resources?” Those who advocate a laissez faire approach fundamentally ignore the imbalance in the British economy, heavily tilted towards London and other major cities. They ignore the ongoing legacy of the collapse of industry in areas like my Wigan constituency, compounded by an uninterested Government which did little to rebuild former coalfield communities until it was ejected from office in 1997. As a consequence, unless the present Government finds a significant way to equalise funding, the impact of these proposals on the most deprived communities in both the north and the south of the country will be huge. Councils like mine, which have already seen above average budget cuts, rely on this redistributed grant for around half of their income. With cutbacks already being made in library services, support for children and adults with disabilities, sure start centres and bus travel for school children, the impact will be felt by entire communities across all ages and incomes.
There may be worse to come. Business rates overall look set to grow, leaving open the possibility that ministers may pass on more funding responsibilities to councils. This option would leave those local authorities which do not have extra income from business rates struggling to provide more services without extra income. In former coalfield sites like Wigan the private sector, although growing, has always been small and since the collapse of the mining industry the council has had to work hard to bring in investment. If the Secretary of State chooses this option, these areas will be hit hardest.
The Government makes the case that greater freedoms provide incentives to local partners to grow business. This often-repeated mantra is an insult to the hard-fought progress that has been made by councils over the past decade. As Robert Dale of the Local Government Information Unit put it: “Success cannot be attributed just to council’s performance, or even primarily to it.” Bank lending, especially to start-up companies, is still low and in areas where unemployment is growing, businesses are struggling because of falling custom. In areas where the public sector accounts for a high proportion of employment regeneration funding is badly needed, but is collapsing.
In that context, a “sink or swim” approach, based on a dogmatic belief in the free market and not on need would not just be wrongheaded; it would be wholly irresponsible. I grew up in Margaret Thatcher’s Britain – a decade characterised by division, anger and despair in large parts of the country which left a lasting legacy. The Government must learn the lessons from that era – not signal, as they have with the scope of this review, that despite a branding exercise in compassion, when you read the small print, very little has changed.
Lisa Nandy is Labour MP for Wigan
