Christabel Cooper: ‘Levelling up’ requires restoring local government funding, including in the capital

Christabel Cooper: ‘Levelling up’ requires restoring local government funding, including in the capital

Britain is more geographically unequal than any other rich country, as the Covid pandemic has highlighted. Covid is a disease that thrives on deprivation and infection rates have often remained stubbornly high in poorer areas. A recent study from the Policy Institute on attitudes to inequality found that the public thought the most serious type of it in Britain was between more and less deprived areas, narrowly ahead of income and wealth. The Conservative pledge in their 2019 manifesto to “level up” the economically disadvantaged areas of the UK reflected this renewed public concern about geographic inequalities. 

London is the wealthiest part of the UK in terms of wages and house prices, but a genuine levelling up programme would benefit the whole country, including the capital. In 2018/19 around £4,000 of tax revenue per Londoner was redistributed to the rest of the UK. In a more equal country this level of redistribution would be less necessary.

It is often claimed that infrastructure spending has been disproportionately and unfairly allocated to London and the South East, though this has been disputed. However it is certainly true that more funding for physical infrastructure, together with investments in improving skills and culture in the regions outside the South East, would increase productivity. This would be of huge benefit both to the people living in those areas and would make them less dependent on London. 

Intriguingly, a recent Redfield & Wilton poll found that as many Londoners thought the city would benefit from levelling up as would lose out, with most believing it will not make any difference. 

Yet there are good reasons for thinking that the government’s current plans to level up will have little impact on regional inequality and, furthermore, that London will end up losing out. As Richard Brown of Centre for London pointed out recently, the criteria for allocating money from the new £4.8 billion Levelling Up Fund seem designed to exclude London, and the designated priority areas contain places which do not seem particularly deprived. Similarly, the 45 places selected to received money from the Towns Fund are not all in areas of very high deprivation. However, 39 of them are in seats held by Conservative MPs.

At the same time, Rishi Sunak’s latest budget contains plans to cut £4 billion per year from spending after next year. It is likely that central government funding of local authorities will be one of the areas worst hit, continuing a trend dating from 2010: figures from the Institute for Government show that central government grants to councils have already been cut by 38 per cent in real terms between 2009/10 and 2018/19. Local government has been an attractive area for swingeing cuts as the impacts are usually less obvious to the public than similarly savage ones to the health or education budgets would be. 

It is also true that many people are unaware of how dependent local authorities are on central government for their income. The assumption is often made that councils get most of their money from Council Tax. In fact, national government grants made up around two thirds of local government funding in 2009/10. But after years of cuts, this had fallen to a half by 2018/19. In response to this dramatic decrease, local authorities have been forced to cut back spending on discretionary areas such as housing (by an average of 50 per cent) and transport (40 per cent) so that they can continue to fund the services they are legally obliged to provide in protecting vulnerable adults and children. 

The reduction in local government funding is important in terms of levelling up because the cuts have hit deprived areas hardest. According to the Institute for Fiscal Studies, spending cuts per person in the most deprived tenth of council areas have averaged 31 per cent (£432), compared with 16 per cent (£134) in the least deprived tenth. In other words, austerity has exacerbated geographic inequalities and this is particularly true for deprived areas within cities. Metropolitan districts and London local authorities have borne the biggest reductions in spending power since 2010. 

A genuine levelling up agenda must therefore start with restoring local government funding to the levels seen prior to 2010. Additional funding targeted at tackling deprivation and investments in both physical and human capital, should be determined according to transparent measures rather than the opaque (and possibly politically motivated) criteria the government is currently using.

This should recognise that deprivation occurs in cities as well as towns, that poverty can co-exist alongside great wealth and that it can manifest itself in different ways. For example, in London, high house prices result in high levels of homelessness and overcrowding, whereas in many post-industrial towns lower house prices result in less housing deprivation, but there is a chronic shortage of well-paid and secure employment. 

This is why it is important that decisions about how to spend money are taken by local authorities, who know their communities, rather than decided by mandarins in Whitehall, who do not. A centralised approach to allocating spending in the regions was an important contributor to the high levels of regional inequality in the UK, yet the government seems to want to repeat this mistake rather than trust locally-elected leaders.

As it currently stands, government spending plans are likely to hit London through further cuts to the local government budget. At the same time, funds designed to encourage “levelling up” will be allocated to areas outside the capital – in many cases to places which are less deprived than some parts of London. This is a missed opportunity to genuinely address deprivation and regional inequality in the UK, something that would benefit the entire country – including London.

Christabel Cooper is a data analyst and a Labour councillor in Hammersmith & Fulham. Follow Christabel on Twitter.

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