Cities must grow their economies, or risk further budget cuts

New research by Centre for Cities warns that unless cities can grow their local economies, they will see their budgets fall even further in the years ahead, potentially putting the provision of public services in jeopardy.

Press release published on 9 May 2012

The report, Ways and Means: Money management and power in local government is the first of a series looking at how cities receive and spend their funds. It shows that, from now on, the amount of money a city has to spend will be more dependent on revenues directly generated by local economic growth.

However, as things stand many cities will struggle to respond to this change, as they still lack sufficient control over policy areas that can boost their local economy. Despite moves to devolve more powers to a local level, Whitehall still determines more than 60 per cent of local government budgets, and sets rules on how they can spend their resources. Unless more is done to provide cities with the flexibilities and freedoms they need to raise additional revenue, and to prioritise spending within their existing budgets, they could be left in the precarious position of having more responsibility for their local finances, but without the tools that they need to grow them.

The report calls on the government to address this by ensuring that the City Deals programme, and the implementation of Lord Heseltine’s proposals to boost local growth, provide our cities with the powers they need to direct investment in transport, housing and skills in their areas. This will allow them to maximise local economic growth, increase the amount they can spend on delivering public services, and make a significant contribution to the national economy.

Alexandra Jones, Chief Executive of Centre for Cities said:
“Cities are currently at risk of being trapped in a halfway house when it comes to local government reform. Despite being critical to the Government’s growth strategy, cities do not yet have all the freedoms and flexibilities they require in order to drive growth and raise revenue at a time when public funding for local government is being squeezed.

If the size of cities’ budgets is increasingly going to depend on the performance of their local economy, then they need far greater control to shape their economies, and discretion to take decisions over how money in their area is invested. This will allow them to prioritise initiatives that will make a real difference to the local economy, increasing council revenues, and thus boosting the amount they can spend on local services.”

For further information please contact Rita Beden, External Affairs Officer at Centre for Cities on 0207 803 4303 /