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Ministers may insist that ‘we are all in this together', but reality shows that public spending cuts still fall disproportionately on poorer regions, complains Paul Woods I can't be the only council treasurer having sleepless nights at the moment. Instead of counting sheep, I've been trying a bit of light reading to help me nod off. The Treasury spending review framework was a particularly riveting read, and I was especially struck by this most worthy commitment: ‘The Spending Review will be guided by the principles of freedom, fairness and responsibility, in order to demonstrate that we are all in this together.' Can such a significantly-higher cut per person really be considered a fair outcome, particularly for a relatively-deprived city and region with a heavy reliance on the public sector? And later, a promise to ‘limit, as far as possible, the impact of reductions in spending on the most vulnerable in society, and on those regions heavily dependent on the public sector'. Coming from a city, Newcastle, with relatively-high levels of multiple deprivation and a far greater reliance on the public sector than most other parts of the country, I liked this promise. Yes, I liked it a lot. Perhaps, just for once, I could sleep easily. But sometimes there is a big difference between warm words in a guidance document and the stark reality of difficult spending decisions. The subject that is now keeping me awake is how the Government will put these principles of fairness into practice. The omens are not good. In-year spending reductions, implemented at break-neck speed following the election, failed to reflect the principles of fairness or limiting the impact on regions heavily dependent on the public sector. The need for speed meant that simple percentage reductions in grants were adopted by many departments. This led to cuts in funding for initiatives specifically aimed at helping the most vulnerable in society, such as the working neighbourhoods fund, which took a 10% hit, even though it is only available to the 65 most deprived areas in the country. The education area-based grant took an across the board 24% cut, which failed to recognise the disproportionate impact in more deprived areas. In fact, the impact of in-year cuts in Newcastle averaged at £30.30 per person – that's 35% higher than the average across England, which was just £22.50 per person. Can such a significantly-higher cut per person really be considered a fair outcome, particularly for a relatively-deprived city and region with a heavy reliance on the public sector? There are some straightforward ways to demonstrate fairness in funding, and we wrote to the Government with our five-point plan before the Comprehensive Spending Review (CSR) was published. We asked that the CSR report should contain a section which states explicitly how its commitment to fairness is being met, as departments seek to implement the cuts they have been allocated. Departments should be required to present to ministers an impact assessment which includes the cash reduction per head of population, and a regional analysis, to ensure that there is transparency about the impact for each local authority and each region. Specific grants which exist to help vulnerable people and focusing on the most deprived areas in the country – such as the supporting people grant and working neighbourhoods fund – should be given greater protection, and the reductions already made in 2010/11 must be taken into account. Where specific grant reductions are made, they should be based on a grant per head of population – adjusted by the area cost adjustment, where relevant – as opposed to a simple percentage reduction. Grant funding is higher in some places to reflect additional needs, often arising from social and economic deprivation. There is a risk that funding cuts will widen the deprivation gap between regions, and there is a strong case for protecting if not increasing the level of cash support. Applying a ‘per capita' reduction gives a more even reduction in funding across the country, demonstrating a commitment to fairness, and recognising that we are indeed all in this together. Where reductions are to be made to the formula revenue grant, they should be on the basis of a general per capita reduction in the central allocation block – protecting those parts of the grant allocation which are there to reflect local variations in deprivation and equalisation for councils with a lower tax base. We have suggested a new formula grant option, which we are calling ‘CAS3' – as an alternative to CLG options CAS1 and CAS2 – which seeks to achieve a reduction per capita as a way of achieving any reduction in formula grant next year. I know councils across the North East have been backing our proposals, and my guess is that authorities in other parts of the country which currently receive higher levels of funding relating to ‘need' or resource equalisation will also be wishing to see how the commitment to ‘fairness' is to be delivered. Paul Woods is director of finance and resources at Newcastle City Council, and an adviser to the LGA and Association of North East Councils on financial issues.

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WHITEHALL

We are not all in this together

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