Comprehensive Spending Review 2010: impact on local areas

The Comprehensive Spending Review has confirmed that local government is going to be making a lot of very tough decisions in the coming months, with local government funding from the centre reduced by 26% over 4 years (very close to the 25% cuts predicted by IFS in Maybased on the Conservative manifesto plan).

The impact of the cuts will vary for different groups, and debate is raging over whether the cuts are “fair”, with the Treasury and IFS among others setting out their analysis.

The impact of the review will also vary by area – and that is what this briefing explores. We outline which local areas are likely to be hardest hit by reductions in spending:

  1. Public sector employment – where is most at-risk?
  2. Welfare reforms
  3. Housing Benefit changes
  4. Social housing rents
  5. Transport costs.

Datasets used in this briefing

1. Public sector employment – where is most at-risk?

The comprehensive spending review forecasts a reduction in public sector workforce of 490,000 over the Spending Review Period. Based on the assumption that job losses will be spread evenly across the public sector, the map and table on the following page highlight those areas most at-risk from job losses.

The table outlines the local authorities in England with the highest proportion of employee jobs in the public sector, in other words those areas that are most at-risk if job losses in the public sector are spread evenly.

Copeland local authority (on the Cumbrian coast) has the highest proportion of jobs in the public sector, with approximately half (50%) of all employee jobs in the public sector. In addition, 15 local authorities across England as a whole have very high levels of public sector dependency, with more than 30% of jobs located in the public sector, including six in the north-east region – Castle Morpeth, Wansbeck, Durham, Middlesbrough, South Tyneside and Newcastle-upon-Tyne.

The map shows the proportion of employee jobs that are in the public sector for each of the local authorities in England. Areas shaded dark blue have high levels of public sector employment. Areas shaded yellow have lower levels of public sector employment

The map highlights the north-south divide – areas in the North of England tend to have the highest levels of public sector dependency. However, although areas in the north are disproportionately affected, there are local authorities with heavy reliance on public sector employment across all parts of the country.

Impact on local areas – summary

People dependent on public sector employment are likely to face increased risks of unemployment as a result of job cuts in the public sector. The north of England is likely to be disproportionately affected, with higher concentrations of public sector jobs in northern areas.

Map 1. Percentage of employee jobs that are in the public sector

Map 1. Percentage of employee jobs that are in the public sector

Local authority Region Number of public sector jobs % of jobs that are in the public sector
Copeland North West 14,200 50.4%
Castle Morpeth North East 11,100 48.7%
Wansbeck North East 5,900 38.1%
Durham North East 16,600 35.2%
Middlesbrough North East 20,400 32.7%
Stafford West Midlands 19,400 32.6%
West Dorset South West 14,400 32.2%
Newham London 22,500 32.2%
Gloucester South West 19,800 31.9%
South Tyneside North East 12,900 31.1%
Source: Annual Business Inquiry 2008

2. Welfare reforms

Reform of the benefit system is intended to deliver net savings of £7 billion per year by 2014-15. Announcements in the spending review include:

  • A cap on the length of time in which some claimants receive out-of-work sickness benefits, with a one-year time limit on contributory Employment and Support Allowance for those in the Work Related Activity Group (those claimants with less severe levels of sickness and disability, who are expected to take part in work focused interviews with a personal adviser to help with preparations for suitable work)
  • reduction in Pension Credit expenditure, with the maximum Savings Credit award frozen for four years (Pension Credit Savings Guarantee is payable to Pensioner’s receiving less than £183.90 a week (single) or £270.12 a week (for couples) and who have made some additional provision for their retirement over and above the Basic State Pension (BSP) and who have a modest amount of income or savings)
  • changes to Working Tax Credit.

Time-limited out-of-work sickness benefits

The table below shows the local authorities with the highest proportion of people claiming out-of-work sickness benefits – Incapacity Benefit and Employment Support Allowance.

The table shows that these groups are highly concentrated in the North of England.

Local authority Region Number of people receiving out-of-work sickness benefits % of all working-age people who are receiving out-of-work sickness benefits
Knowsley North West 12,635 13.5
Blackpool North West 11,175 13.2
Liverpool North West 37,255 13.1
Easington North East 7,575 13.1
Stoke-on-Trent West Midlands 18,180 12.2
Burnley North West 6,435 12.1
Blackburn with Darwen North West 10,165 11.9
Hartlepool North East 6,605 11.8
Halton North West 8,725 11.6
Barnsley Yorkshire and the Humber 15,970 11.5
Source: Department for Work and Pensions February 2010

Pension Credit Savings Credit award frozen for four years

The table below gives in indication of the potential geographic impact of freezing Pension Credit Savings Credit, by highlighting the local authorities with the highest proportion of older people receiving Pension Credit savings element. Kingston-upon-Hull has the highest proportion of Pension Credit claimants receiving savings element, with other local authorities with high proportions of these claimants largely located in the North East.

Local authority Region Number of people receiving Pension Credit savings element % receiving Pension Credit savings element
Kingston upon Hull, City of Yorkshire and the Humber 4,060 9.5
Hartlepool North East 1,495 8.6
Sedgefield North East 1,550 8.5
Derwentside North East 1,545 8.4
South Tyneside North East 2,630 8.3
Sunderland North East 4,475 8.2
Gateshead North East 3,215 8.1
Sandwell West Midlands 4,260 8.0
Wear Valley North East 1,030 7.6
Easington North East 1,475 7.5
Source: Department for Work and Pensions February 2010

Changes to Working Tax Credit

Working Tax Credit is payable to people working at least 16 hours a week whose income is below a certain threshold. The spending review proposes changes to Working Tax Credit (WTC) eligibility rules, so that couples with children must work 24 hours per week between them with one partner working at least 16 hours a week in order to qualify for the WTC.

There will also be a reduction in the percentage of childcare costs that parents can claim through the childcare element of the Working Tax Credit (WTC) from 80 per cent to 70 per cent in April 2011. The map and table below show those areas most affected by changes in Working Tax Credit

The table shows the ten local authorities with the highest proportion of families receiving Working Tax Credit; five of these areas located in coastal local authorities, with Penwith in West Cornwall containing the highest proportion of claimants.

The map below shows the proportions of families receiving Working Tax Credit across local authorities in England. Areas shaded blue have high proportions of people receiving Working Tax Credit. Areas shaded yellow have lower proportions.

The map shows that Working Tax Credit claimant rates are typically higher in areas outside of London and the Greater South East.

Impact on local areas – summary

Welfare reforms are likely to impact on a range of groups receiving state benefits including those out of work through sickness (receiving Employment Support Allowance), older groups on low income (receiving Pension Credit Savings Guarantee) and people in work on lower incomes (receiving Working Tax credit). Benefit claimant rates are typically higher outside of the Greater South East region and these areas are likely to be disproportionately affected by benefit cuts.

Percentage of people receiving Working Tax Credit

Map 2. Percentage of people receiving Working Tax Credit

Local authority Region Families receiving Working Tax Credit % of families receiving Working Tax Credit
Penwith South West 3,350 47.9
West Somerset South West 1,445 44.5
Torridge South West 2,980 44.4
Blackpool North West 7,885 44.1
Berwick-upon-Tweed North East 1,190 43.4
Blackburn with Darwen North West 8,640 42.5
Pendle North West 4,750 42.2
North Cornwall South West 3,770 41.6
East Lindsey East Midlands 5,820 40.6
Leicester East Midlands 15,625 39.8
Source: HM Revenue and Customs 2006

3. Housing Benefit changes

Housing Benefit has been reformed as part of the Spending Review, with the Local Housing Allowance capped at the 30th percentile of property rents in the local area (previously the Allowance was set at a higher level; the median, or 50th percentile, of local property rents).

Research by the guardian (http://www.guardian.co.uk/news/datablog/2010/aug/12/housing-benefit-cuts-by-local-authority) has calculated the average shortfall between Local Housing Allowance and median rents for each of the local authorities in England. The table (over the page) shows the local authorities with the largest gap between Local Housing Allowance and market rents for a three bedroom property.

Each of the ten areas with the largest gap between the Local Housing Allowance and local rents is in London, with the largest shortfalls in central London Boroughs of Westminster and Kensington and Chelsea. This is unsurprising, as these areas also have the highest overall property rents

The map (over the page) shows the ‘Housing Benefit gap’ (the gap between Local Housing Allowance and market rent for a 3 bedroom property), for local authorities across England. Areas shaded blue have the largest gap between LHA and rent and areas shaded have the smallest gap.

The map shows that the largest shortfall between Housing Benefit and market rent are in local authorities in London and the Home Counties. Outside of these areas there is a large shortfall in areas with high private sector rates including Bath, Exeter and Cambridge.

Impact on local areas – summary

Housing Benefit claimants will face significant difficulties in those areas with the highest property rents, particularly in London and the Home Counties, but also those areas with high private sector rates such as Bath, Exeter and Cambridge. There is likely to be pressure on these local authorities to relocate claimants to cheaper areas.

Average shortfall between Housing Benefit and local market rent

Map 3. Average shortfall between Housing Benefit and local market rent

Local authority Region Average Housing Benefit loss per loser (per week)
Kensington and Chelsea London £281
Westminster London £262
Camden London £96
Islington London £75
Hammersmith and Fulham London £47
Brent London £37
Ealing London £27
Wandsworth London £27
Lambeth London £27
Tower Hamlets London £27
Source: Guardian DataBlog

4. Social housing rents

Social housing will be reformed as a result of the Comprehensive Spending Review. As part of these reforms, social housing rents for new tenants will be increased to 80% of market rent levels.

The table (over the page) identifies areas with the largest gaps between social and private housing rent ; unsurprisingly, the majority of these areas are concentrated in central London given the high rents in these areas.

The map (over the page) shows the gap between social and private rents across the country as a whole. Areas shaded blue have the largest gaps between social and private rents. Areas shaded yellow have the smallest gaps.

The map shows that the areas with the largest gap between private and market rents are largely concentrated in the South East, particularly in London and adjacent counties.

Impact on local areas – summary

New and prospective social housing tenants living in areas where market rents are high are likely to be greatly affected by this reform. As with the cap on Housing Benefit, there is likely to be pressure for social housing to be located in cheaper areas.

Gap between social housing and market rents

Map 4. Gap between social housing and market rents

Local authority Region Social Housing rent Private housing rent 80% of private housing rent Gap between social housing rent and private rent (80%)
Kensington & Chelsea London £73 £934 £747 £674
Westminster London £87 £934 £747 £660
Lambeth London £94 £934 £747 £654
Hammersmith & Fulham London £73 £470 £376 £303
Islington London £82 £476 £380 £299
Camden London £83 £477 £381 £299
Wandsworth London £82 £476 £380 £299
Hackney London £105 £470 £376 £271
Tower Hamlets London £75 £394 £315 £240
Merton London £81 £394 £315 £233
Source: Communities and Local Government 2009

Social housing need

There is significant unmet demand for social housing, and the Comprehensive Spending Review proposes to deliver 150,000 homes over the period of the review. However, this is unlikely to provide for the demand in social housing, with approximately 1.8 million people on waiting list for social housing (excluding households waiting for transfers).

The table below shows the local authorities with the highest proportion of households on local authority housing registers (excluding those waiting for transfers). These households will have to pay 80% of market rates if they can get access to affordable housing.

Local authority Region Number of household on the housing register % of households waiting for social housing
Sheffield Yorkshire and the Humber 97,818 43.3
Newham London 28,649 30.2
Bradford Yorkshire and the Humber 56,072 29.4
City of London London 1,291 25.8
Tower Hamlets London 19,681 22.4
Brent London 21,737 21.1
Sefton North West 15,132 20.2
Newark and Sherwood East Midlands 9,602 20
Bolton North West 22,035 19.9
Telford and Wrekin West Midlands 12,438 18.6
Source: Communities and Local Government 2009

The areas with the highest proportions of households on housing waiting lists are largely concentrated in metropolitan areas including four in London and significant numbers in the large Yorkshire cities of Sheffield and Bradford. (and we did recheck the Sheffield figures – which do indeed seem to suggest that more than 40% of households in Sheffield are on the waiting list for social housing).

5. Transport costs

Rail fares are likely to increase at a faster rate as a result of the Comprehensive Spending Review. Currently, annual fare rises are capped to the July Retail Price Index (RPI) inflation figure (this year it was 4.8%), plus 1%. However, following the review, this cap is to be relaxed, with rail fares rising by RPI inflation plus 3% from 2012 for the next three years.

The table and map below highlight areas most affected by rail price increases. The table shows areas with the highest proportion of people travelling to work by train. The majority of these areas are in South London (where there is limited underground provision), with Brentwood in Essex the only local authority outside London where more than one-in-five people travel to work by train.

The map shows the proportion of people travelling to work by train in local authorities across England as a whole. Areas shaded blue are among the local authorities with the highest proportion of people travelling to work by train, while areas shaded yellow have the lowest proportions.

The map shows that the highest proportion of people travelling to work by train are located in South London and the Home Counties. This reflects the large number of people who commute into London by train. The map shows that a smaller proportion of people commute into other large cities in England by train. This suggests that the increase in rail fares is likely to have a bigger impact in the South East than across other areas of the country.

Impact on local areas – summary

Increases in rail costs are going to significantly impact on areas with higher proportions of people commuting to work by train, with areas surrounding London likely to be most affected.

Proportion of people travelling to work by train

Map 5. Proportion of people travelling to work by train

Local authority Region Number of people travelling to work by train % of people travelling to work by train
Lewisham London 33,003 28.8
Bromley London 39,030 27.6
Greenwich London 22,144 24.2
Bexley London 24,757 23.9
Croydon London 32,819 20.9
Brentwood East of England 6,612 20.2
Kingston upon Thames London 14,625 19.5
Richmond upon Thames London 16,793 18.8
Wandsworth London 25,290 17.9
Havering London 18,600 17.8

Leave a Reply

Your email address will not be published. Required fields are marked *

*