31 January 2013
Rt Hon Eric Pickles MP
Secretary of State for Communities and Local Government
A second open letter on the local government cuts from the Core Cities Click here to see the letter in full with appendices
Dear Secretary of State,
The Core Cities urban areas deliver 27% of the nation's wealth and independent forecasts demonstrate they can do much more. These places are vital to the future growth and prosperity of the nation as a whole, recognised by Government in the City Deals, which we have all welcomed and worked closely on with ministers. Our recent letter to the Prime Minister, and our subsequent meeting with him and the Deputy Prime Minister clearly demonstrated our ambition to take that work forward to another level and our willingness to make a positive offer to work with the Government on growth.
We are also ambitious for far reaching reforms of the public sector, devolving and re-engineering key elements of the system to get better results across all related agencies - local government, health, welfare, social care, justice – providing better outcomes and greater savings over time.
We stand on the cusp of positive, lasting and fundamental change, yet we are deeply concerned these efforts will be undermined. Following our letter to you of 18th December, we write to you again to set out the evidence that the scale of the cuts in local government grant and the particular way in which they disadvantage the Core Cities is creating a financial crisis that threatens the economic and reform agendas. We welcome the offer of regular meetings by your ministerial colleague Brandon Lewis MP and we will of course take up these issues through that channel. We also repeat our request for a full summit meeting on finance with cabinet ministers so that we can make progress on this shared challenge.
We have provided significant data in the three appendices to this letter, but in summary the key issues are:
â€¢ The Core Cities are vital to the economic performance of the nation as a whole and this scale of cuts will undermine our efforts to work with Government to support growth. Economic success is intimately linked to the provision of adequate public services, yet the scale of reductions for our cities will undermine those services that support growth and impact directly upon this agenda. The Government's efforts to provide a financial framework that incentivises investment in growth are welcome, but the result in the short term seems to be to reward the places already succeeding.
â€¢ There is a looming financial crisis in our cities. The growing pressure on services, in particular social care and other changes to the funding system mean that our real savings targets are several times greater than the cuts in grant. The biggest cuts in funding are still to come, with the average grant cut in 2014-15 now likely to be around 10% and the Chancellor making it very clear in his Autumn Statement that cuts into the next Parliament will be significantly greater than previously expected. As a result the reductions in important services that will inevitably begin this year will intensify with the complete decommissioning of some services from 2014-15.
We welcome the debate on public sector reform, particular the Community Budget Pilots, and in many ways our cities would like to go further in reforms than Government has indicated. But achieving reform takes time and should start from a firm foundation. Instead, we will be starting from a position of crisis which could undermine reforms and longer term savings across all Government Departments, including health and welfare spending. We will have very little money for any services other than social care by the end of this decade, but many services will have to be decommissioned long before then as funds diminish and they become unviable. See Appendix 1.
â€¢ The cuts are unfair to local government as a whole and to the more deprived parts of the country in particular, and hence to the people we serve as we have now clearly established. Attempts to counter this by pointing out that the cities have a higher per capita grant than better off areas miss the point - this is the case because we are required to deliver a much greater volume of core statutory services to those in need. See Appendices 2 and 3.
â€¢ The spending cuts for 2013-14 are significantly greater than previously announced and the original spending power figures contain serious inaccuracies. There has been no ministerial correction in Parliament or apology for the provision of this misleading information. See Appendix 1.
Your “Fifty Ways to Save” document would not have contained any surprises for most local authorities and feels out of touch with long established local government practice. As you yourself have said “local government has shown great skill in reducing its budgets” and is the most efficient part of the public sector. All of us can show that we have already implemented most of the suggestions and we are happy to provide details on request. However they provide nowhere near the scale of savings needed to meet the cuts.
Some of your suggested savings are only relevant to some local authorities, yet they are presented as if all councils are in the same position. For example you urge councils to make use of reserves, but in reality our reserves are now at a very low level. Whilst we may be able to borrow from earmarked reserves, these cannot be used without plans for repayments to be made. In any case, they are only available on a one-off basis and so do not offer a permanent solution to an on-going problem. In the case of Birmingham unallocated reserves are now just 1.85% of net budget in 2012-13 and the council has received auditor's advice to increase its reserves for several years running. A recent external review of the council's financial situation has repeated that advice. The unallocated reserves available to the other cities are as follows: Bristol 2.7% of net budget in 2012-13, Leeds 4.5%, Liverpool 5%, Manchester 4.4%, Newcastle 3.8%, Nottingham 3.6% and Sheffield 2.2%. As the Audit Commission found last year the median level of unallocated reserves for counties and single tier councils was 5% at March 2012. For districts in two-tier areas it was 22% . That report also said that 3 to 5% was commonly regarded as a prudent level.
We all support your intention of rolling out community budgets across the country. This is fundamental to achieving a more sustainable system of local public services. But it cannot be achieved simply at the whim of local authorities - it requires government departments to localise their budgets and work with us on a place based rather than departmental agenda. Many councils and the four pilots have put in an enormous effort in developing the community budget approach and we now look forward to the Government playing its part by taking further steps in that direction.
The data attached show that this crisis is very real and will have a significant impact on the quality of life and economic vitality of our greatest cities. But we believe it can be tackled if the Government is prepared to work with us instead of just repeating calls for efficiency savings that are already being made but will in any case be inadequate.
Local councils have been portrayed as being opposed to change and scaremongering or “holding out a begging bowl”. On the contrary the Core Cities would urge the government to be more radical and bolder in making the necessary reforms to local services and how they are financed - as long as these are progressive reforms that produce better outcomes.
Local government is not one single system but a range of very different councils performing different roles and the cities and city regions have a major role in driving economic growth. The impact of these cuts cannot be separated from that wider role which we fear will be undermined. In Bristol, for example, there is a real danger that funds from the Enterprise Zone and City Deal will be diverted to meet unfunded pressures on services which will in turn prevent prudential borrowing or direct investment for the infrastructure that underpins economic growth.
The current system is creaking under the pressure of the scale of cuts being made and its inequitable and unsustainable nature is becoming apparent. The unitary authorities such as the Core Cities are losing out partly to support an inefficient system of two-tier government in other parts of the country. While some of the rural districts may be closest to bankruptcy it is in the cities that the full impact in terms of social need will be felt.
The spending pressure from adult social care makes up a significant proportion of the funding gap we will be facing in the next few years, so action now to create a sustainable system will help. Other measures to take forward community budgets in a speedier and more far reaching way could also help by creating a more flexible financial environment. Perhaps there are also ways in which the proposed single pot for growth related funding can be used flexibly to relieve other pressures in the cities. The Government should also make the current allocation of funding fairer by correcting some of the anomalies we have already raised.
In the light of this further evidence we would again urge you to meet with us all for a full conference at which we can discuss these and other solutions to the financial crisis ahead. We will be seeking the widest possible support for this letter from MPs in our cities and city regions.
We look forward to your positive reply.
Mayor Joe Anderson, Mayor of Liverpool
Sir Albert Bore, Leader of Birmingham City Council
Cllr Jon Collins, Leader of Nottingham City Council
Cllr Julie Dore, Leader of Sheffield City Council
Mayor George Ferguson, Mayor of Bristol
Cllr Nick Forbes, Leader of Newcastle City Council
Sir Richard Leese, Leader of Manchester City Council
Cllr Keith Wakefield, Leader of Leeds City Council