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1 July 2010

Coalition economics: the view from the East End

Areas like Newham need investment, not cuts, says the borough’s mayor.

By Robin Wales

Last week we saw the toughest Budget in a generation. It’s no use pretending that we can escape some tough, even brutal, decisions over the coming years. However, I believe we also need to invest in London — in our people as well as our infrastructure — with east London providing the greatest return.

Stimulating economic growth is key. The Olympic and Paralympic Games in 2012 are one part of a huge opportunity in east London. Next year, Westfield will open the biggest urban shopping mall in Europe. Over the next decade Stratford will become a major new metropolitan district within the capital.

It is estimated that, at today’s prices, raising the productivity of the Thames Gateway to the same level as the rest of the south-east would contribute around £13bn to UK GDP. In other words, success here has a national impact. Investing in places like Newham means investing in the future of our economy.

Newham has a record that stands comparison with anywhere else on achieving efficiencies — some £70m worth over recent years. For some years we have achieved a high level of savings while ensuring as much money as possible goes to our front-line services.

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As a result we now have the lowest council tax of any borough in Outer London while continuing to fund our front-line services. These include universal free school meals for primary school children (in a partnership with the last government that does it great credit), free swimming for kids and older people, and free social care at home.

But a 25 per cent cut is unprecedented for the public sector. We have simply never experienced the impact of this anticipated level of cuts before. We need to ensure excessive central cuts do not force or panic us into making the wrong choices.

Pay as you go

The key to our approach must be fairness. We know there’s no more money in the pot, but we need to ensure that while we pay down the deficit we don’t cripple the poorest communities at the same time.

At the last election all national politicians talked of fairness — but I am unconvinced that they fully understood that fairness costs money, at least in the short term. Building a poor, disadvantaged community into an active, self-reliant one costs money, but pays for itself in later years.

At the moment, deprived boroughs such as Newham are being forced to make £4.6m of cuts, whereas richer boroughs like Richmond need only find savings of £900,000. Add to this the rise in VAT and the freeze to child benefit — and you’re hitting low-income families that already have it hard.

Incidentally, watch the smoke-and-mirror subsidy the Chancellor announced in the Budget to freeze council tax — you will find that the wealthiest areas will get the biggest subsidy in cash terms. For example, a subsidy of 1 per cent to Newham to freeze council tax will provide us with £700,000 a year. To Richmond, the same percentage subsidy will provide over £1.1m. — and they have 52,000 fewer people than we have.

George Osborne has said that we’re all in this together, but his early actions suggest otherwise. It should be those with the broadest shoulders who bear the greatest burden, not the most vulnerable in our society.

And on the policy front, too, we need to take care. The capping of housing benefit will make vast areas of London off-limits for people on low incomes, creating a two-tier city where deprivation is entrenched.

The coalition says it is committed to mixed communities and to fairness for families. This cap proves otherwise. But it’s also economically short-sighted. To enhance the capital’s capacity to stimulate recovery, we need even investment and mixed communities, so as to ensure continued investment and return to UK plc from across the capital. If we entrench poverty and dependency we will be spending public funds to little effect for years to come.

Robin Wales is mayor of Newham.