From the TUC

The impact of cuts in the North East

27 Sep 2010, by in Economics

As part of the £6.2 billion in year cuts announced by the coalition Government on the 24th of May, £1.166bn is being cut in local government spending through reductions in individual grants given to local authorities. Area based grants (ABGs) are given to councils to help support deprived communities. The amount of ABG each local authority receives is therefore reflective of their individual needs and circumstances. In applying the cut to the ABG the Government has not taken in to account the particular circumstances of local areas: areas that are already badly off are more likely to feel the impact of reductions in these grants.

In this post I have looked at a selection of cities in the North East to give a picture of how the cuts are impacting on local areas, and how the North East has been particularly affected.

In Sunderland grant reductions of £9.321m have been made; this includes a revenue grant reduction of £5.091m and capital grant reductions of £4.230m. The revenue grant reduction is principally a reduction to the Area Based Grant – £4.054m.

The reductions to the ABG which will have a particularly negative impact on local areas include:

• Connexions Service (cut of £800,000- 20% cut): This grant reduction is anticipated to have a significant impact on Connexions Services which provide careers advice to young people.
• Working Neighbourhoods Fund (cut of £1,084,000- 27% cut): As a consequence a number of measures have been taken, which will have a negative impact on future employment prospects in the city. This will impact on a number of projects including a grant cut which will result in the deletion of five projects from the’ visible workspaces capital programme’, which is designed to develop highly accessible workspaces in deprived neighbourhoods. A project to support lone parents into employment has also been removed from the programme.
• Prevention Grants (cut of £440,000- 11% cut): ABG grant reductions include cuts for a number of prevention measures including anti-bullying initiatives, programmes to reduce first -time offending, positive activities for young people, teenage pregnancy reduction programmes, and measures to improve physical and mental health.

In Newcastle revenue and capital funding received by the council in 2010/11 will be reduced by £9.9m; this is compromised of revenue funding reductions of £4.2million and capital funding reductions of £5.7 million. The financial impact of in-year funding reductions is shown below on a selection of grant reductions:

• Education Area Based Grant – 1.997m
• Road Safety Revenue Area Based Grant – 0.093m
• Housing and Planning Delivery Grant – 0.073m
• Supporting People Administration Area Based Grant – 0.205m
• Working Neighbour Hood Fund Area Based Grant – 1.012m
• Cohesion Area Based Grant – 0.018m

The Education Area Based Grant includes a grouping of grants that gives extra resources to help children in the most deprived areas of the country. The council allocated £167.50 per child aged 0-17 compared with an England average of £120.04. As ABG has been reduced by 24 per cent, the reduction in Newcastle amounts to £1.997million: £40.14 per child compared with an England average of £28.77 – an extra reduction of £11.37 per child.

Middlesbrough Council have seen reductions in their Area Based Grants totalling £2.705 million out of an original grant allocation of £25.881m. This is a reduction of 10.45%, and a summary of the total reduction by service area is provided below

• Children Families and Learning – £942,840
• Regeneration – £952,922
• Environment- £121,418
• Social Care-£776,450

Overall, the Journal reports that more than £50m has been extracted from the North East, with money being taken from grants from poor areas, cash for deprived children and a total of £34m across the area being taken from the Area Based Grant. As a result of these cuts many schools and charities have had to drastically scale back their plans. This article further reports that nine of the region’s authorities were in the higher bracket for cuts, with just one in London.

The Evening Chronicle reports a similar story, stating that children and the jobless in some of Tyneside’s most needy neighbourhoods are being targeted for cuts. The Leader of Lib Dem controlled Newcastle City Council is so concerned that he has sent a strongly worded letter to the Department for Education warning that its decision to cut the Area Based Grants which it is responsible for would have damning consequences for Tyneside. He calls on the Government to think again about the ‘critical issue for children in very deprived areas.’

Similar concerns are apparent in Middlesbrough, where the Evening Gazette reports that councillors fear that the Council could eventually face a 20 per cent cut in their spending. The Deputy Mayor reports that the cut in Middlesbrough was the sixth highest in the UK in percentage terms.

The cancellation of the Building Schools for the Future programme has also impacted on the region. The Journal reports that Education Chiefs in the North East have hit out after dozens of school rebuilding projects were cancelled by the new Government. The Government has halted rebuilding of 46 schools in the region, the areas worst affected by the announcement included North Tyneside where 11 projects have been cancelled, and County Durham, which has lost 14 rebuilding schemes.

Sunderland’s Wave 1 Building Schools for the Future programme generated in excess of £120million capital investment. With the announcement of the closure of the programme on the 5th of July, Bridget Phillipson, the Labour MP for Houghton and Sunderland South, called the announcement a ‘devastating blow’ for the schools concerned and the construction industry relying on the jobs. The MP said the work would have given a huge boost to the construction industry in the region, where there are huge concerns about jobs.

The cuts to Area Based Grants and the cancellation of the Building Schools for the Future programme are only a few of the series of the cuts that have been made by Government: a large number of national cuts (including cuts in welfare and social security ) have been announced which will also affect households deeply across the North East. This is all before the CSR, when you consider the scale of the cuts that are likely to come in the Spending Review, the impact of the cuts in this region will become very clear.

Unemployment in the North East is currently 9.1 per cent, one of the highest regional rates in the country. While recently unemployment has been falling, with around 36 per cent of the regional workforce employed in the public sector the likelihood of joblessness rising again seems high.

TUC research has shown the North East (NE) is likely to be particularly hard hit by cuts and that regions with lower average household incomes and more deprivation (including the North East) tend to make greater use of public services than more affluent regions (such as the South East and East of England). In addition, recent independent research undertaken for the BBC considered the ability of each local authority to withstand sudden changes in public spending, undertaking analysis of variables including the extent of vulnerable industry within an area, the life expectancy of residents, earnings of workers, unemployment and crime rates to create an index of ‘resilience’ to spending cuts. The data shows that out of the 17 areas covered in the North East, 12 of them rank above 250, ranking is from 1 to 324, with 1 ranking least resilient. This includes Middlesbrough, Newcastle and Sunderland – where cuts are already having real impacts for frontline services.

One Response to The impact of cuts in the North East

  1. stan herschel
    Sep 27th 2010, 9:27 pm

    just take a river trip up the tyne. the cuts have been ongoing for years. problem is no oune said nowt when it was new labour