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What Did the 2013 Spending Review Mean for UK Cities?

28/06/2013 12:46 BST | Updated 28/08/2013 10:12 BST

Although braced for bad news in terms of cuts to their budgets, 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 ultimately deliver for our urban areas?

First, Local government budgets were hit hard in this Spending Review, with funding for councils receiving a headline 10% cut that Stephanie Flanders of the BBC suggested would amount to a 35% cut in real terms for local government since 2010 (although the Chancellor argued that other measures meant that the 'true' additional cut for local government would be just 2% in 2015/16).

More generally, there continues to be a lack of a 'place' focus in policy announcements, resulting in a lack of debate about what decisions will mean in different places around the country. This is critical as when budget cuts are combined with proposed cuts in welfare (which will affect some city economies significantly more than others) many cities will find it very tough to manage their budgets giving rising demands for services. More must be done to give our cities greater powers to control and direct the money they currently raise and spend, as well as to benefit from any local savings made.

Alongside budget cuts, the Spending Review did provide further clarity on Lord Heseltine's proposed Single Local Growth Fund, aimed at pooling various funding streams and giving Local Enterprise Partnerships strategic control of them. However, there was disappointing news here too, as despite Lord Heseltine initially making the case for £49bn of spending to be included over a four year period, the size of the pot announced this week was just £2bn per year over five years.

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 9 Regional Development Agencies had in the mid 2000s).

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. 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.

Finally, it was good to see the science and innovation budgets protected, with a rise in capital spend for science. They are critical to the future prosperity of the UK and we need to make the most of them in the years ahead.

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. The implementation of these cuts at a national and a local level will likely be painful for policymakers at all levels.

The 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 arrive in 2015-20. Given the outcome of the General Election is far from certain, it remains to be seen how significant many of the announcements on infrastructure funding will turn out to be.