Fresh evidence of North-South divide in Government funding (From The Northern Echo)

Fresh evidence of North-South divide in Government funding

8:30am Tuesday 27th December 2011 in Durham City News By Stuart Arnold

COUNCIL leaders last night turned up the heat on the Government by presenting fresh evidence of a “North-South divide” when it comes to funding.

Research by the Association of North-East Councils (ANEC) has produced a “heat map” showing how under current proposals for grant funding every North-East council will see its spending power reduced in 2012-13, the worst-hit being Hartlepool and South Tyneside.

In contrast, scores of councils, largely in the South, will actually have more money to fund services for each person in their area.

The map takes into account a reduction in councils’ revenue support grant, along with additional funding provided by the Government for council tax freezes and the New Homes Bonus scheme, which rewards councils for promoting new housing.

The findings appear to fly in the face of a previous pledge by Prime Minister David Cameron in April last year, before the General Election, that there would be no targeting of the North-East for public sector cuts.

Mr Cameron followed that up by stating in January that there was “absolutely no attempt to treat the North-East worse than other parts of the country – actually it’s the reverse”.

Bill Dixon, leader of Darlington Borough Council, which has to make more than £10m worth of savings in 2012-13, said: “We are constantly being told we are all in this together, but this map clearly demonstrates it is not true and authorities in the North are bearing a fair greater percentage of the cuts than elsewhere.

“By and large the cuts represent a North-South divide.

The money is going down South by the wagon load.

“We want to see a fairer funding system that does not penalise the more deprived areas and is not politically motivated.”

Paul Woods, director of finance at Newcastle City Council and an advisor to ANEC, said the map, which has been presented to Government officials, showed that “red” councils would get “a lot less” cash.

He said: “It is a helpful way of shedding light on a complicated issue.

“The way the funding is being allocated, the most deprived and poorest areas are seeing the biggest cash reduction and the heat map itself illustrates that point.

“Areas in the South are getting an increase in their budgets, whereas areas in the North-East are still having to cut because of the way the funding is allocated.”

ANEC claims the basic revenue support grant previously compensated councils who have a large proportion of homes in the lowest council tax band, which diminishes their spending power.

But changes to the way the grant is being calculated “significantly” reduce this equalisation, hitting hardest in the poorest areas.

As a result it says there is a risk of a “postcode lottery” developing when it comes to the provision of vital services.

Mr Woods said: “This is one of the reasons why the system is unfair and it needs to be urgently looked at and corrected for the start of the new arrangements from 2013-14.”

Durham County Council leader Simon Henig, whose authority has to make £150m of savings over a four-year period up to 2014-15, said: “We will be meeting Government ministers in the next few weeks to lobby our case, but we have done that already on a number of occasions and unfortunately it has had no impact whatsoever.”

It is thought council cuts could take several hundred million pounds out of the North-East economy when the knock-on impact on the private sector is also taken into account.

Earlier this month, credit information group Experian said business insolvency rates were on the rise in the North-East, North-West and West Yorkshire, but had recently decreased in the South-East.

Professor John Tomaney, of Newcastle University, said: “The way the system works is to the benefit of the affluent shires in the South. It is now widely accepted that the Northern regions are bearing the most severe cuts in terms of the area funding change per person.

“This research demonstrates that very starkly.”

A Government spokesman said: “The proposed settlement is fair between different parts of the country – North and South, rural and urban, metropolitan and shire.

“In calculating the settlement, ministers have ensured that formula grant funding per head is higher in those parts of the country with the highest level of need.

“The Government has delivered a tough, but fair, settlement ensuring the most vulnerable communities were protected.

“Driving down the nation’s deficit is the Government’s biggest priority, but we have made sure that extra money, powers and funding freedoms are available to protect frontline services.”