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Is Birmingham treated unfairly? A detailed look at Government funding for Birmingham City Council

By Jonathan Walker on Jan 10, 13 04:30 PM in Politics

Has Birmingham been unfairly targeted for funding cuts by the Government?

This is one of the major bones of contention between Labour, including city MPs and the council's Labour leader Sir Albert Bore, and the supporters of the Government.

But the figures seem to me to throw doubt on any suggestion that the city is receiving larger cuts in Government grant than other authorities. The cuts suffered by Birmingham - as a proportion of total grant - are similar to those experienced by other councils.

What they do show is that the council may be less able to cope with cuts in funding from central government because it is more reliant on the Treasury than many other authorities. Councils serving wealthier areas receive a larger proportion of their revenue from council tax - and are therefore better able to cope. Those serving more deprived communities, or a mixture of rich and poor, are more dependent on central government, and suffer more when central funding is cut.

A detailed study of the latest funding announcement, on December 19, when Local Government Secretary Eric Pickles announcing provisional figures for local government funding in 2013/14 and 2014/15, has been produced by staff in the House of Commons library. This is not a government document but a paper published by the Commons for all MPs.

The paper shows that funding for Birmingham City Council is to be cut by £16 million in 2013-14 and £72.5 million in 2014-15. The funding, made up of a grant called the revenue support grant and business rates, comes to £783 million in 2013-14 and £711 million in 2014-15.

This is a cut of 2 per cent followed by a cut of 9.3 per cent in the funding per dwelling which Birmingham receives from the Government, the Commons library calculates.

Other major cities such as Manchester, Liverpool and Leeds experienced roughly the same cuts. For example, Manchester's cut is 2.8 per cent followed by 9.4 per cent.

The average funding cut across English councils is 3.9 per cent followed by 8.5 per cent.

A claim that is sometimes made is that wealthier authorities are actually experiencing smaller cuts. Comparison is difficult, because councils which are comparable to Birmingham - big city unitary authorities - tend also to serve similar communities. The southern councils serving wealthier communities, which critics of the government claim receive more favourable treatment, tend to be two-tier councils.

However, Birmingham certainly does no worse than some "rich" councils. Funding in Windsor and Maidenhead - a unitary authority - will be cut by 6.4 per cent and then by 8 per cent.

The average cut for shire councils across England is 4.7 per cent followed by 8.7 per cent.

Funding for Surrey County Council, serving one of the wealthiest areas of the country, will be cut by 4.7 per cent and then by 5.2 per cent, but the councils are not directly comparable because Surrey has a two-tier system of local government. District councils within Surrey face cuts of around 9 per cent followed in 2014-15 by cuts of around 12 per cent.

To really look at the how Birmingham's cuts compare to cuts in Surrey, you need to look at the total cut to local government funding per household for both the county council and district councils in Surrey. Let's use Guildford District Council in Surrey as an example. This is the district council with the lowest cuts, so it is the authority most likely to prove the thesis that Surrey's cuts are lower than Birmingham. Total council funding in Guildford, including both the district and county council, has fallen from £678 per dwelling to £642 and then £601. This is a cut of 5.4 per cent, followed by a cut of 6.4 per cent. Although the second year cut is significantly smaller than Birmingham's, the total cut over two years is just as high.

The figures above compare the proportion of council funding which has been cut. If you simply look at the cash amounts, Birmingham's cut is one of the highest. For example, between 2014-15, funding per dwelling in Birmingham falls by £170 while in Windsor and Maidenhead it falls by just £36, and the national average cash cut for councils in England is £96.

But this really reflects the fact that Government funding per household in Birmingham is higher than in most places. Funding in 2014-15 will be £1,663, compared to £416 in Windsor and Maidenhead and a maximum of £604 in Surrey, where the cash is shared across two tiers of local government. The national average funding per household will be £1,028.80.

It seems to me that you can argue it is right that Birmingham receives more funding because the council faces more demands on its services, due to levels of deprivation and other social issues associated with big cities - even though this argument will go down very badly in places like Bromsgrove, which can look forward to funding of £597 per dwelling in 2014-15 (this is the total sum adding together grants to Worcestershire County Council and Bromsgrove District Council). However, it seems to me that if you accept that argument, you then have to accept that the fairest way of comparing cuts to funding is by looking at the proportion, not the cash total. Worcestershire can't be expected to absorb the same cuts in cash terms as Birmingham when it gets less than a third of the funding.

So far I've looked at government funding. But a major difference between councils serving wealthier communities and those in more challenging areas is that the wealthier councils have traditionally raised more funding from council tax, and are therefore less reliant on government grants.

Birmingham's total "spending power", which includes council tax revenue, is set to fall by 1.1 per cent in 2013-14 and 6.0 per cent in 2014-15, according to the House of Commons. In the same period, Surrey County Council faces a cut of 0.2 per cent followed by a cut of 1.3 per cent, according to the House of Commons figures. In Windsor and Maidenhead, the cut is 2 per cent followed by 1.8 per cent. The average cut in spending power for councils across England is 1.7 per cent followed by 3.8 per cent.

So while Birmingham is experiencing roughly the same cut in government funding as other councils, the impact on its budget is much greater.

It's tempting then to say that councils in wealthier areas - the ones most able to fall back on council tax revenues - should be forced to accept even larger cuts, in order to subsidise authorities such as Birmingham. While there's a case for doing this, one has to note that authorities in wealthier areas are already forced to make do with much lower grants from central government. As I said, government funding per dwelling in Birmingham in 2014-15 will be £1,663 while in Worcestershire it will be around £600. Windsor and Maidenhead will get £416 per dwelling, West Berkshire will get £553 and Wokingham will get £454.


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8 Comments

Dreary said:

God Birmingham is dreary , 2nd city no way the city fathers must be positively spinning right now.

binky said:

"you can argue it is right that Birmingham receives more funding because the council faces more demands on its services, due to levels of deprivation and other social issues associated with big cities"

That argument only works when the deprivation is a result of forces beyond local authority control. But when the LA is part of the problem, central government (and any source of funds, for that matter) is right to refuse a bailout.

It's never going to be clear-cut, but it cannot be said that higher levels of deprivation on their own are a sufficient justification for higher central government spending.

If only central and city government were more focused on the things that do improve people's life chances...

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