Poorer cities have borne the brunt of austerity. Time to fix it, Chancellor

Liverpool, 2008. Image: Getty.

The chief executive of the Centre for Cities on its latest survey of urban Britain.

Before the 2016 referendum the government’s austerity programme was the defining political issue of our age. Over the last 10 years, the public spending reductions implemented following the 2008 financial crisis have radically altered the nature and shape of the state at the national and in particular at the local level.

Until very recently it looked as if this period of austerity was to become the new normal. But in her party conference speech last October the Prime Minister announced that austerity was coming to an end. Whether austerity actually ends only time will tell, but even if it does for the state as a whole, the worry is that for parts of the public sector, and in particular for local government, the austerity story will carry on well into the next decade. 

Local government experienced the deepest cuts by far in the last ten years. While this has made councils more efficient and effective, the sheer scale of the cuts is increasingly impacting on their ability to provide local services to their residents, particularly those most reliant of such services.

Our Cities Outlook 2019 report, released this week, examined this issue in detail and found that nowhere has felt the fiscal pinch of austerity more than cities. Despite being home to around half the population, the country’s 62 biggest cities and towns have shouldered three quarters of all cuts to local government. In cash terms, this is equivalent to a £386 cut for every city dweller over the last decade, compared to just £172 per person living elsewhere.

Poorer northern cities have been hit especially hard. The five cities that saw the biggest falls in spending were located in the North of England, with Barnsley, Liverpool and Doncaster all seeing real-terms cuts of over 30 per cent. Liverpool’s per head spending fall was by far the biggest in the country, equivalent to £816 for everyone living in the city.

Unfortunately for these cities, their weaker local economies meant that they have been less able to absorb the cuts to their central government grant funding by generating income from other means such as raising council tax or increasing fees and charges for services.

This is a problem on many levels. Firstly, there is a question of fairness. The cuts were not intentionally designed to fall harder on poorer cities, but this is the reality of how they played out. As a result there is a moral case for correcting the unintended impact of this approach.

Secondly, on a more strategic level, cities are the economic hubs that drive our national prosperity; their performance is felt far beyond their political boundaries. Therefore cuts to services that help make our cities vibrant and dynamic places to work, live and visit, such as planning and economic development will not only harm them in the long term, it will also hit the country’s prosperity.

How can we address this situation? Yes, more money would go a long way in the poorer cities that have seen the biggest falls in spending; but it is not just a question of cash. There are relatively cost-free measures that the Chancellor should introduce as part of the upcoming Spending Review to empower city leaders to more effectively manage their finances.


First, the current restrictions on what councils can spend funds raised through public charges on should be loosened. Currently, for example, money raised through parking charges can only be spent on transport. Having to spend scarce funding on potentially unnecessary transport initiatives makes little sense to people seeing their libraries and children’s centres closing due to lack of money. The Chancellor should address this in the upcoming Spending Review.

He should also enable councils to set multi-year budgets – where spend and income can vary year on year within the budget period. The current rules force them to set annual balanced budgets which make delivering long-term strategic service reforms and investments in areas such as health, social care, housing and transport very difficult.

The final challenge for cities’ finances will be the hardest to solve: developing a sustainable social care funding strategy. Cities Outlook 2019 found that the growing demand for social care is adding to the squeeze on cities’ finances. A decade ago, just four cities out of the 62 we studied spent the majority of their budget on social care: now, half of them do. It is no coincidence that Barnsley, the city that has seen the largest cut in spending nationally, is also the city that dedicates the largest share of its budget to funding social care in Britain.

Developing a long-term plan for meeting our growing social care demands is crucial to addressing cities’ financial challenges.

Cities are home to 58 per cent of the UK’s high skilled jobs, 60 per cent of new business starts and 62 per cent of the country’s GVA, making them vital to our national success. However a decade of falling spending, particularly in areas deemed “non-essential” such as economic development, planning and skills, has greatly weakened the capacity of cities to support sustainable long-term growth.

The upcoming Spending Review is an opportunity for the Chancellor to address this challenge and allow them to take back control of their finances. It is in all of our interests that he doesn’t miss this opportunity.  

Andrew Carter is Chief Executive of Centre for Cities; you can read its Cities Outlook 2019 report here.

This article previously appeared on our sister site, the New Statesman.

 
 
 
 

“Without rent control we can’t hope to solve London’s housing crisis”

You BET! Oh GOD. Image: Getty.

Today, the mayor of London called for new powers to introduce rent controls in London. With ever increasing rents swallowing more of people’s income and driving poverty, the free market has clearly failed to provide affordable homes for Londoners. 

Created in 1988, the modern private rented sector was designed primarily to attract investment, with the balance of power weighted almost entirely in landlords’ favour. As social housing stock has been eroded, with more than 1 million fewer social rented homes today compared to 1980, and as the financialisation of homes has driven up house prices, more and more people are getting trapped private renting. In 1990 just 11 per cent of households in London rented privately, but by 2017 this figure had grown to 27 per cent; it is also home to an increasing number of families and older people. 

When I first moved to London, I spent years spending well over 50 per cent of my income on rent. Even without any dependent to support, after essentials my disposable income was vanishingly small. London has the highest rent to income ratio of any region, and the highest proportion of households spending over a third of their income on rent. High rents limit people’s lives, and in London this has become a major driver of poverty and inequality. In the three years leading up to 2015-16, 960,000 private renters were living in poverty, and over half of children growing up in private rented housing are living in poverty.

So carefully designed rent controls therefore have the potential to reduce poverty and may also contribute over time to the reduction of the housing benefit bill (although any housing bill reductions have to come after an expansion of the system, which has been subject to brutal cuts over the last decade). Rent controls may also support London’s employers, two-thirds of whom are struggling to recruit entry-level staff because of the shortage of affordable homes. 

It’s obvious that London rents are far too high, and now an increasing number of voices are calling for rent controls as part of the solution: 68 per cent of Londoners are in favour, and a growing renters’ movement has emerged. Groups like the London Renters Union have already secured a massive victory in the outlawing of section 21 ‘no fault’ evictions. But without rent control, landlords can still unfairly get rid of tenants by jacking up rents.


At the New Economics Foundation we’ve been working with the Mayor of London and the Greater London Authority to research what kind of rent control would work in London. Rent controls are often polarising in the UK but are commonplace elsewhere. New York controls rents on many properties, and Berlin has just introduced a five year “rental lid”, with the mayor citing a desire to not become “like London” as a motivation for the policy. 

A rent control that helps to solve London’s housing crisis would need to meet several criteria. Since rents have risen three times faster than average wages since 2010, rent control should initially brings rents down. Our research found that a 1 per cent reduction in rents for four years could lead to 20 per cent cheaper rents compared to where they would be otherwise. London also needs a rent control both within and between tenancies because otherwise landlords can just reset rents when tenancies end.

Without rent control we can’t hope to solve London’s housing crisis – but it’s not without risk. Decreases in landlord profits could encourage current landlords to exit the sector and discourage new ones from entering it. And a sharp reduction in the supply of privately rented homes would severely reduce housing options for Londoners, whilst reducing incentives for landlords to maintain and improve their properties.

Rent controls should be introduced in a stepped way to minimise risks for tenants. And we need more information on landlords, rents, and their business models in order to design a rent control which avoids unintended consequences.

Rent controls are also not a silver bullet. They need to be part of a package of solutions to London’s housing affordability crisis, including a large scale increase in social housebuilding and an improvement in housing benefit. However, private renting will be part of London’s housing system for some time to come, and the scale of the affordability crisis in London means that the question of rent controls is no longer “if”, but increasingly “how”. 

Joe Beswick is head of housing & land at the New Economics Foundation.