Support 100 years of independent journalism.

  1. Politics
19 December 2014

Cutting council funds: the government’s ill-conceived rebalancing act

The government's local authority cuts will inhibit growth in the regions, rather than building a "northern powerhouse".

By Joe Anderson Joe Anderson

Imagine if the Ministry of Defence was forced to scrap one of its three major services. Would ministers choose to do without the RAF, the navy or the army? This is the type of impossible choice councils have faced as they have lost, on average, a third of their budgets since 2010.

Austerity has bitten hard and although local authorities have stepped up to the mark – innovating wherever possible to avoid losing valued services – the impact has been obvious enough. The pain has been felt by all non-ring-fenced areas of spending: libraries, home helps, roads, parks, playgrounds, waste collections and major events.

In Liverpool, we have lost 58 per cent of our budget. By 2017, we will have reduced our spending by £330m. These are not merely numbers on a spreadsheet. These cuts translate into fewer jobs (2,200 and counting), less investment and reduced spending power in our local economy. Yesterday’s local government financial settlement leaves Liverpool facing  a further 5.9 per cent cut to our budget – three times the national average of 1.8 per cent.

But the cuts we have undergone – and are set to endure for the foreseeable future – undermine what is claimed to be another key ministerial priority: rebalancing our local and regional economies away from an over-reliance on public money through developing a vibrant private sector.

We’re playing our part. We have had success over the past year in attracting large private sector employers like H2 EnergyAmey, BT, TNT Postand Seadrill to relocate here, creating 1,500 jobs. Meanwhile, the recent International Festival for Business in Liverpool has led to deals that will create around 10,000 jobs in the city-region over the next three years.

Sign up for The New Statesman’s newsletters Tick the boxes of the newsletters you would like to receive. Quick and essential guide to domestic and global politics from the New Statesman's politics team. The best of the New Statesman, delivered to your inbox every weekday morning. The New Statesman’s global affairs newsletter, every Monday and Friday. A handy, three-minute glance at the week ahead in companies, markets, regulation and investment, landing in your inbox every Monday morning. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A weekly dig into the New Statesman’s archive of over 100 years of stellar and influential journalism, sent each Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy

So, it could be argued, if we have had this success why do we need more funding from the government? It is not only because it is increasingly a struggle to provide vital statutory services like social care, but money lost through cuts to our Whitehall grants (which accounts for four-fifths of councils’ finance) stymies local growth and investment too. This makes it harder for cities like Liverpool to diversify our economic base, provide more and better job opportunities and build-in greater resilience to protect our economy in the bad times.

George Osborne says he wants a “Northern powerhouse” acting as a counterweight to London and the southeast. Nick Clegg says he wants rebalancing too, claiming, earlier this month, that capital investment for the government’s “roads revolution” will do just that. But the same logic about the importance of public investment in driving growth, escapes them when it comes to local authority spending.

Rebalancing our economy is something we all agree on. But if ministers are really serious about driving growth in the regions, then they need to understand that taking money out of our local economies through endless cuts to council budgets slows this process and, perversely, makes us even more reliant on public spending.

Joe Anderson is Mayor of Liverpool