Today's Spending Review will hit cities hard – unquestionably.  Amid the gloom, we did find some specifics that could help cities support future economic growth in the difficult years ahead.  Here are some initial specifics:

Where will the Spending Review bite cities hardest?

  • Welfare bore the brunt of some of the most savage cuts – with savings of £7 billion a year sought by 2014-15.  Limits will be placed on the benefits available to those currently receiving Employment Support Allowance.
  •  Cities with the highest share of residents claiming benefits will be hit hard.  These are often the same cities as those most reliant on the public sector for jobs – like Barnsley and Hastings.
  • At the Emergency Budget, the OBR forecast a reduction in general government employment of 490,000 by 2014-15. The OBR will release a revised forecast on 29 November. 

Stronger cities start here?

  • The ‘infrastructure budget’ has been increased by £2 billion, compared to the June Budget. Ironically this takes the figures back to Labour’s March figures, with the Coalition having made £2bn per year extra cuts in June.  The Centre for Cities emphasised the importance of continued infrastructure spending to support future economic growth in our Spending Review submission.
  • Capital expenditure on transport will remain relatively constant in nominal terms.  The capital budget at DfT was cut by 11 percent, compared to 74 percent at CLG.
  • Funding will be made available to support Crossrail, which is a move we support.  See Boris’s take on how London’s transport network delivers economic benefits for cities and towns across the country. 

Devolving the axe?

The Spending Review has ushered in new freedoms for cities.

See page 32, “the Government will devolve significant financial control to local authorities. Ringfencing of all local government revenue grants will end from 2011-12, except simplified schools grants and a new public health grant. The number of separate core grants, set out in Chart 1.4, will be radically reduced from over 90 to fewer than 10, excluding schools, police and fire. More than £4 billion of revenue grants will be rolled into formula grant;”

But much less cash - the local government grant will fall by 7.1% per year or 27% in real terms.

More Spending Review analysis to follow...