From the TUC

The impact of the cuts in London

04 Nov 2010, by in Society & Welfare

As attention focuses on the impact of housing benefit cuts in London this week, we look at recent research on their impact and the wider impact of cuts in London.

The Government claims that the cuts being made will be fair and progressive, and maintain that the most vulnerable will be protected. However our analysis of the impact of spending cuts on the ground suggests that even at this early stage, it is simply not possible to make such steep reductions in spending without hitting the most vulnerable. 

As part of the £6.2 billion in year cuts announced by the Government in May, £1.166bn is being cut in Local Government spending across England through reductions in individual grants given to local authorities.

Research by London Councils has shown that that London will lose around £74.3 million in terms of Area Based Grants (ABG). ABG’s are given to councils to help support deprived communities. The amount of ABG each local authority receives is reflective of their individual needs and circumstances. But in applying the cuts to the ABG, the Government has not taken into account the particular circumstances of the local area. Areas that are already badly off are therefore more likely to feel the impact of reductions in these grants.  London Councils shows that deprived boroughs like Hackney and Islington have received massive cuts of over £8 million while affluent boroughs like Sutton and Richmond were cut by £2 million or less. In total London Boroughs and the Greater London Authority (GLA) are set to lose at least £355 million in year as a result of this funding cut in Local Government- this is 30% of the national cut.

Further cuts to Local Government were made in the Comprehensive Spending Review (CSR). Local Government funding saw a 7.1% reduction, which will amount to 28% over the next four years. Most authorities’ cuts are significantly front-loaded to 2011-12 so the impact of the cuts will not just hit hard they but will also be felt immediately. In addition ring-fencing of all Local Government Revenue Grants will end from April next year, apart from the Schools Grants and a Public Health Grant. The removal of ring-fencing along with the 28% cut has raised real fears that services for children and families will have to be sacrificed.

A large number of national cuts (including cuts in welfare and social security) that will deeply affect households across London have also been announced. The changes in Housing Benefit (HB) will hit London disproportionately as rental prices are higher in the capital. The main changes to HB announced in the Emergency Budget, are as follows:

•       From April 2011 HB will be capped at £250 a week for a one bedroom property; £290 a week for a two bed room; £340 a week for a three bedroom and £400 a week for a four bed room.

•       From October 2011 the method of calculating the entitlement of private rented sector HB tenants will be changed from the 50th percentile to the 30th percentile of median local rents.

•       From 2013 updating entitlements on the basis of consumer price index (CPI) rather than local rents; and, also from 2012 HB will be cut by 10 per cent for those who have been claiming Jobseekers Allowance for over 12 months.

Research by London Councils has shown that 82,000 households across the capital will be at risk of losing their homes under the Government’s HB changes. Those unable to keep up with their rents will either be made homeless, forced to move into overcrowded accommodation or have to move to less expensive boroughs.

It is not just expensive areas in Central London that will be affected; according to the London Weekly, the highest number of people affected in any borough is in Brent where 9,650 households will lose out. Hackney and Tower Hamlets are the second and third most deprived boroughs in the country and they will see 6,790 and 3,580 poor households losing money.

In the CSR the Government also announced that they will only spend £4.4bn on building social housing from 2011-15, down from £8.4bn over the previous three years –  a 60% cut. The reduction in the number of new social homes being built in London will only further deepen the city’s housing crisis.

National social security cuts will also have a significant impact on families in London:

•         Abolition of the Child Trust Fund (CTF): From January 2011-12, up to 126,000 new born London children will miss out on the CTF.

•         Abolition of the Health in Pregnancy Grant: It is estimated that 140,000 mothers-to-be in London were eligible for the Health in Pregnancy grant last year and will now miss out.

•         Freezing Child Benefit for three years: This will hit over one million families with children in London.

•         Scrapping plans to extend free school meals for children from low-income families: This will affect over 100,000 London children and their parents.

London Voluntary Service Council (LVSC) report that London’s charities and voluntary groups are already facing cuts at a London-wide level in the region of £50 million – a figure that doesn’t take account of wider national grant cuts to the voluntary sector.

The Building Schools for the Future (BSF) programme cancellation will also affect the capital –  out of the 715 schools that will no longer benefit from a rebuild 170 are run-down secondary schools in London. The worst hit boroughs are Ealing, Hillingdon, Hammersmith and Fulham, Hounslow, and Wandsworth. This is at a time when the capital needs another 28,000 permanent primary school places by 2014/15 and demand for secondary school places will follow suit.

Our report also considers how the cuts are impacting on London boroughs.  Children have been particularly hard hit. For example, in total Southwark will see grant income reduced by some £5.1m in 2010/11. Of the £2.45m total reduction in children’s services revenue grants, the most significant is the £2.2m (equating to a 20 percent) reduction in the ABG. This grant is used to fund key children’s services and activities such as: careers advice for young people; extended services and travelling to school initiatives; under- attainment, and healthy eating.

In Lewisham, outside of the Dedicated Schools Grant the borough is currently in receipt of specific grants of £36.43 million and ABG of £36.37 million in 2010/11. It is in these areas that funding reductions are being made. Almost all the specific grants relate to schools and children’s services.  The loss for Lewisham is £3.295m, with a total of £2.735m of these reductions to come from ABG areas, the bulk of which affects children and young people.

Croydon Council is to make £2.1 million of cuts from its children, young people and learners (CYPL) budget. These cuts form part of the £5 million of savings the council has to make following central government’s decision to cut back its £34.5 million ABG for this financial year.

There have also been substantial in-year specific grant reductions in the City of Westminster.  The Council has lost £5.7 million of grants: £4.2 million of revenue spend and £1.5 million of capital funds. The Department of Education (ABG) had the biggest reduction, a grant reduction of 1.6m, 25% reduction.

The impact of the cuts in Local Authority Grants show that spending reductions so far have been about far more than about reducing waste: front line services have been affected. The analysis also shows that the cuts have been especially harmful for children and young people – this group of people have been particularly affected by the cuts agenda.

To download the full report click here

4 Responses to The impact of the cuts in London

  1. Tweets that mention The impact of the cuts in London | ToUChstone blog: A public policy blog from the TUC —
    Nov 4th 2010, 2:34 pm

    […] This post was mentioned on Twitter by ToUChstone blog and Michael Ellis, Andy Bean. Andy Bean said: RT @touchstoneblog: The impact of the cuts in London […]

  2. Paul mmackney
    Nov 5th 2010, 1:01 pm

    Excellent summary on London, Anjum. Thank you very much. ~paul~