What does the Spending Review mean for growth in our cities?

Everyone knew there would be very little money to spare in Wednesday’s Spending Review and Thursday’s ‘Growth Statement’. The slow recovery of the national economy has put paid to any attempts to move away from ‘austerity’, so departmental cuts of up to 10 per cent came as no surprise.

Centre for Cities

By Ben Harrison of the Centre for Cities

Everyone knew there would be very little money to spare in Wednesday’s Spending Review and Thursday’s ‘Growth Statement’.

The slow recovery of the national economy has put paid to any attempts to move away from ‘austerity’, so departmental cuts of up to 10 per cent came as no surprise.

Yet many cities also held high expectations that the Spending Review would bring some good news on additional freedoms for local areas to prioritise spending, and new capital investment to boost local growth.

So, now that we have heard from both the chancellor and the chief secretary to the Treasury, what did the Spending Review deliver for our urban areas?

The honest answer is that it’s a mixed picture. The rhetoric from government continues to be encouraging but national policies still lack a ‘place’ focus, and there remains too much emphasis on central government control rather than local autonomy.

Take Heseltine’s Single Local Growth Fund. Initially proposed as a £49bn fund over four years, it ended up being £2bn a year for five years.

While it’s good news that a direction of travel has been established, creating some degree of certainty for Local Enterprise Partnerships wishing to make investment decisions, £2bn is hardly a ringing endorsement for devolution to local areas.

Digging beneath the detail, much of the money is not new (about £700m has already been allocated to local areas for transport or the New Homes Bonus); and when you divide it between 39 LEPs, it’s not a great deal of money (it’s roughly the same as the nine Regional Development Agencies had in the mid 2000s).

Nevertheless, it is good to see skills money included, and now it’s been created it will be difficult to put the localism genie back in the bottle (provided local areas deliver).

The challenge for Whitehall as it finalises guidance about how the money will be allocated is to ensure that, even if the amounts are smaller than we had hoped, there is devolution of decision-making and that access to the funds do not involve local areas jumping through a lot of Whitehall-devised hoops.

Although many of the commitments made on capital investment were re-announcements from previous statements, there were some positive new commitments made on housing and infrastructure that could benefit our urban areas.

Those engaged in the delivery of affordable housing will welcome the certainty of enshrining social rent levels up to 2025, and an additional £3bn of capital investment over three years will be used to deliver 165,000 new affordable homes from 2015.

Alongside committing to the delivery of various transport improvements, the government also committed to providing the Green Investment Bank with an additional £800m to invest, as well as a new power to borrow a further £0.5bn from government.

However, there remains a need to ensure that we are looking now for ‘shovel-ready’ projects in which to invest; far too few infrastructure projects have got off the ground in recent years.

It was also good to see confirmation of Manchester’s Earn Back deal, involving Manchester keeping a proportion of the benefits generated by increasing local economic growth.

However we still need to see more steps taken down the road of ‘Community Budgets’, allowing local areas to pool budgets across silos in order to deliver more effective, efficient local services in a way already demonstrated in pilot areas such as Manchester and Essex.

In the end, this was a Spending Review focussed on delivering additional public spending cuts, rather than an immediate transformation of the role of local government in driving growth in their areas.

In this regard, local government has again been hit hard, receiving a 10 per cent cut that Stephanie Flanders of the BBC suggested would amount to a 35 per cent cut in real terms for local government since 2010 (although the Chancellor argued that other measures meant that the ‘true’ cut for local government would be 2 per cent in 2015/16).

The implementation of these cuts at a local level will likely be painful, and necessitate many tough decisions to be taken.

The new Single Local Growth Fund may, in time, lead to greater levels of devolution to local areas on growth, but the vast majority of good news on capital investment will only take effect in 2015-20.

In the meantime, in the two years before these announcements kick in, there’s still much more to do to give greater freedom to cities with the capacity to deliver growth and provide greater support to those cities struggling with capacity, decline or both.

One Response to “What does the Spending Review mean for growth in our cities?”

  1. Kevin Leonard

    Those engaged in the delivery of affordable housing will welcome the certainty of enshrining social rent levels up to 2025, and an additional £3bn of capital investment over three years will be used to deliver 165,000 new affordable homes from 2015.

    I despair of the authors lack of understanding regarding the above statement. There is no such thing as “Affordable housing ” any-more as there are no jobs where people can earn enough to afford buying them. The need is for more, much more Social rented accommodation a return to council housing and the premise that 165,000 houses over 3 years is a good thing beggars belief when we are at least 2 MILLION homes short right here right now.

    This disgusting “review” was nothing more than a jam tomorrow sop designed to appease staunch conservative voters and others stupid enough not to realise they were being conned yet again.

    What is needed from this site and all others purporting to be “left wing” is a concentrated effort to change the direction of the once social Labour party, they we should be demanding the scrapping of Trident which only politicians are in favour of keeping along with the stupidity of HS2 which will only add to the profits of private rail companies gifted the opportunity to run it take the cost of both these projects (estimated @ £150 billion) and start building houses for rent NOW.

    Unfortunately because of the set up of all political parties and their betrothal to the bankers it is something we as a nation would have to fight on the streets to obtain but it is in fact a fight worth taking up.

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