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Fair's fair

Mark Easton | 17:29 UK time, Wednesday, 9 February 2011

As MPs debate the fairness of the government's cuts to local authority budgets in England, an interesting conversation with a ministerial source reveals something of the political thinking behind the settlement.

I was trying to understand how the government could regard it as fair that every voter in Labour-controlled Hackney should lose £210.19 in "spending power" as a result of the cuts (8.8% reduction), while their equivalent in Conservative-controlled East Dorset is losing £2.86 (roughly 2%).

The upshot of this settlement is that the council in one of the most deprived neighbourhoods in the country is making £44m worth of cuts in the coming year, while the district council in one of the least deprived is making no cuts at all.

My ministerial source explained that, during the Labour years, extra grants were given to poor areas - money, he said, "they were not due". His point was that the Formula Grant councils receive from central taxation already includes additional funds taking account of the level of deprivation in an area. The new settlement, he explained, was simply "unwinding that process".

This argument about the fairness of the local government funding cuts is one which Eric Pickles, the secretary of state for communities and local government is happy to debate. He argues that there is far more scope for savings in authorities that have been receiving more money.

However, the effect of the settlement is that poor neighbourhoods are taking a bigger hit than rich ones.

Research by interest group Core Cities using Mr Pickles' own figures, shows how, generally, the more deprived an area, the bigger the proportionate cut in its budget.

So, while urban areas with high levels of poverty, unemployment and health pressures are losing almost 9% of their spending power as a result of the cuts, less deprived districts such as Wokingham in Berkshire are losing less than 1%. Mr Pickles, however, argues that this is because poorer areas have been receiving far more money from central government and therefore have more scope for efficiency savings.

In East Dorset, for example, roughly 75% of council income is from local taxes with just 25% from general taxation. In Hackney, it is pretty much the other way around. The consequence is that, even after the cuts, East Dorset voters will each have about £900 spent on them while in Hackney it is over £2,000.

The leader of East Dorset District Council, Conservative councillor Spencer Flower uses such figures to argue the fairness point in reverse.

"How fair is that then? How fair has it been in the past that that weight of government funding has not been in Dorset, it has been elsewhere. We have had to live by our own means."

The elected mayor of Hackney, Labour's Jules Pipe, takes a different view.

"Hackney gets more because it has a greater need. We have got higher unemployment, more children on free school meals, greater number of people with chronic health conditions. It is unfair that we are seeing bigger cuts than affluent areas."

"Fairness" is in the eye of the beholder.


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