Austerity and the uneven impact of local government cuts in English cities

Key statistics 

• English councils lost around 27% of their spending power between 2010 and 2015, reflecting significant reductions in local government funding during the austerity period 

• the most deprived local authorities lost about £268 per person in spending power (26%), compared with around £67 per person (9%) in the least deprived areas 

• the historic ‘equalisation’ funding premium for deprived councils fell from 46% higher spending per capita in 2010 to 19% by 2016, reducing the capacity of poorer councils to meet higher levels of need 

• in case study areas, around 45% of all savings were taken from services used more by poorer groups, reflecting the large share of spending on these services 

Key messages 

• austerity policies significantly reduced local government funding in England, placing pressure on city councils 

• poorer cities experienced larger funding reductions than more affluent areas because they relied more heavily on central government grants 

• even where councils attempted to protect vulnerable groups, the structure of local government spending made it difficult to shield services used most by poorer residents 

• reductions in universal services such as libraries, parks and neighbourhood maintenance can have greater impacts on disadvantaged communities 

• austerity policies therefore contributed to a “regressive redistribution”, where financial pressures placed on cities ultimately affected poorer households most 

Policy implications 

• national funding arrangements for local government should account for levels of deprivation and service demand 

• restoring mechanisms that compensate poorer areas for higher social need could reduce inequities in service provision 

• policies should consider how reductions to universal public services may disproportionately affect disadvantaged communities 

• stronger protections may be needed for services that support vulnerable populations 

• local and national policy should address how funding reductions affect the long-term capacity of councils to deliver social and community services 

Gaps 

• the study focuses on a small number of city case studies, which may not represent the experiences of all local authorities 

• further research is needed on the long-term impacts of austerity on specific services such as adult social care 

• limited quantitative evidence exists on how service reductions translate into measurable outcomes for different population groups 

• more research is needed to understand how local policy decisions mediate the impact of national funding changes 

Commentary 

This study examines how austerity policies affected local government services in English cities and how these financial pressures ultimately affected poorer communities. The research combines national financial data with detailed case studies of several English local authorities to understand how funding reductions translated into changes in services. 

Between 2010 and 2015, English local authorities experienced significant reductions in their spending power. The study shows that these reductions were not evenly distributed. Councils serving more deprived populations tended to lose a greater share of their funding because they relied more heavily on central government grants. When these grants were reduced, the financial impact was larger for poorer areas. 

One important finding is the erosion of the historic principle of equalisation in local government finance. This principle aimed to compensate poorer councils for the higher levels of social need they faced. As austerity policies reduced this funding premium, poorer councils became less able to provide services at levels comparable with more affluent areas. 

The research also highlights how the structure of local government spending affects how cuts are experienced. Many services provided by local authorities are used more frequently by lower-income households. Because these services make up a large share of council spending, it becomes difficult for councils to protect them completely when budgets are reduced. 

Even services used by all residents can affect disadvantaged communities more strongly when they are reduced. For example, cuts to libraries, parks or neighbourhood maintenance may have greater consequences for households with fewer private resources or alternatives. 

From a health and social care equity perspective, the study demonstrates how funding decisions made at national level can influence the distribution of services at local level. When deprived cities lose more resources, their ability to support vulnerable populations may decline. 

Overall, the study shows that austerity policies can produce uneven impacts across places and populations. Without mechanisms that account for differences in local need, reductions in local government funding risk reinforcing existing social and geographical inequities.