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CAF Policy Team

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Charities Aid Foundation

Austerity and cities

28 January 2019

The Centre for Cities has today published its annual health check on UK city economies, and the results should not be a surprise. A decade of austerity has meant that cities are feeling the pinch, with public services being placed under huge pressures. The need for a new approach to funding at the local level is vital.

According to the report, cities have shouldered the highest proportion of all local government cuts, with nearly three-quarters (74%) of all real-terms local government funding cuts in the last decade coming at city level. Of course, that is not to say that towns and rural areas are not feeling the effects of austerity too, of course they are. But cities, the report argues are absolutely vital to our national economy – delivering employment and growth and driving investment. Without them doing well, we will all be worse off.

What are some of the key issues?

Undoubtedly the reduction in central government funding is the biggest problem, but shifts in demographics are simultaneously increasing demand, particularly for services such as social care, whilst the money to pay for such things is being stretched.

Councils are being asked - or forced - depending on how you look at it - to generate more money at the local level. A shift to the localisation of business rates is certainly helping, whilst some councils have responded by drawing down their reserves or becoming more entrepreneurial through the sale of property or charging for services.

But despite the attempts to raise money by different means, services are still being affected. As social care takes up a growing share of overall spending, it doesn't take a financial expert to work out that there's less money for other things. Non-statutory services such as planning, libraries and cultural activities are first in the firing line, but questions should be asked about the role of local councils in these situations.

Are they not supposed to be the custodians of our local areas, the providers of services and the champion of local culture, or are they quite simply the organisation responsible for delivering social care?

Making changes

The report urges the UK Government to address some of the financial challenges facing cities. It is clear that for austerity to end cities need:

  • fairer funding to ease the pressure on services
  • social care funding reform to reduce the burden on cities
  • freedom to raise new funds and decide how to spend them
  • long term budgets to provide certainty
  • sales fees and charges raised in one service area to be spent on any service area

These recommendations are useful ones, and no doubt government should consider them when preparing for the Spending Review later this year.

But what if there was something else that cities and government could be doing? At CAF, we believe one of the key themes that is missing from many of these sorts of discussions about devolution and regional development is the role that philanthropy can play; not only supplementing economic investment into an area - but also allowing its communities and citizens to flourish.

The Centre for Cities report is right that much of the discussion around regional development that started a few years ago with the introduction of city deals, and the launch of the Northern Powerhouse and the Midlands engine, seems to have disappeared. From the outset, those initiatives did not even mention philanthropy, and certainly did not see the key role it could play in reconnecting people to places as well as delivering vital funding that many communities urgently need.

Of course, philanthropy is not a silver bullet and it should most certainly not be seen as a replacement for government funding, but it is a vehicle for reconnecting people with the cities and places they live in and love, at a time when financial investment is needed more than ever.

To read more about our thoughts on philanthropy in cities, please visit our Giving for the City web hub.

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