Axing of formula will give poorer North-East less spending power, councils claim

UNFAIR: Simon Henig

UNFAIR: Simon Henig

First published in News The Northern Echo: Photograph of the Author by , Parliamentary Correspondent

RICH parts of the south will soon receive higher funding than much poorer North-East towns under secret new Government cuts, council chiefs warn today (Thursday, January 16).

Ministers are quietly axing a formula – drawn up by John Major’s Government, 20 years ago – to protect struggling areas with a low tax base, they claim.

The result will be that Wokingham, a leafy market town in Berkshire, will enjoy higher ‘spending power’ than Darlington, from next year, the Association of North-East Councils (ANEC) said.

And the same town will even overtake Newcastle from 2019 – a large city with huge problems of social deprivation unknown in privileged Berkshire.

Shocked North-East MPs, who received the bleak message at a Westminster briefing, spoke of the Government carrying out a “war on our communities”.

And Simon Henig, Durham County Council’s Labour leader, accused ministers of calling time on an historic, cross-party commitment to helping poorer areas.

Mr Henig said: “This is a massive change in policy. We will be overtaken by Wokingham, which will receive more money – even before need is taken into account.

“It is a clear unfairness. The quality of local services will reflect the wealth of an area unless this changes, because there is no other way for us to raise finance.”

Ian Mearns, the Gateshead MP, said: “There’s a war going on against our communities, inflicted on us in the most ruthless fashion I can remember in 30 years.”

The accusations came as ANEC submitted its response to the latest council cuts, announced last month.

Town halls in the region will lose up to £1 in every £9 of their ‘spending power’ between 2014 and 2016 – on top of massive reductions since 2010.

Among the worst hit will be Middlesbrough (down 11 per cent), Hartlepool (9.1 per cent), Sunderland (8.6 per cent), Redcar and Cleveland (7.1 per cent) and County Durham (6.3 per cent).

But ANEC is even more concerned about a plan – never announced to Parliament – to slash away a part of the funding formula called “council tax resource equalisation”.

Designed to allow councils to charge a similar Band D tax to provide similar services, it will be cut by 12 per cent in 2014-15 – and a further 25 per cent and 15 per cent in the years after that.

ANEC said the result will be a higher spending power – combined funds from council tax, business rates, the New Homes Bonus and Government grants – in Wokingham than in Darlington, from 2015-16.

It chose Wokingham because David Cameron and other ministers have repeatedly quoted its much lower spending power to defend the fairness of council funding.

A spokesman for the department for communities and local government (DCLG) did not dispute the changes to equalisation and conceded that Darlington and Wokingham would be "roughly on a par" in spending power, from next year.

But he said: "Local government finance now puts councils in the driving seat, rewarding them with more income for supporting local enterprise, building more homes and backing local jobs.

“In the coming year councils should stay focused on cutting waste, making sensible savings, modernising frontline services and keeping council tax down.”

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