Labour cuts plan could save North authorities £25m compared with Tories', says council leader

Councillor Simon Henig said Ed Miliband's proposed slashing New Homes Bonus would see £3m pumped back into North East council funds

Durham Council leader Simon Henig
Durham Council leader Simon Henig

Ed Miliband’s pledge to slash a new-build incentive payment and slow down council cuts would save North East local authorities £25m, it was claimed last night.

The Labour leader announced this week his party would get rid of the Coalition’s New Homes Bonus (NHB) - a payment the region’s council leaders say gave Tory-led southern councils an unfair advantage - if it won power at the General Election in May.

He also said Labour would offer “sensible reductions in public spending” with £500m planned each year from 2016. The proposals include capping child benefit rises at 1%, selling off “unwanted” Government assets and stopping the winter fuel allowance for what Mr Miliband called “the wealthiest pensioners”.

He faced criticism for his commitment to further cuts in public spending and the Tories said Labour’s plans will lead to levels of borrowing that places the economic recovery at risk.

Councillor Simon Henig, leader of the North East Combined Authority, however, said the plans would give North East councils a significant financial boost.

He said scrapping of the NHB would save Durham County Council alone £3m, with other North East local authorities set to save a similar amount.

As it stands, Councillor Henig said, North East councils’ are having to “top-slice” the Revenue Support Grant - councils’ central fund - to plug the gap while NHB cash is handed to Southern councils building new or larger homes.

Coun Henig, who leads the Labour-majority authority, said a graduated approach to cuts would also give cash-strapped councils some breathing space.

Under George Osborne’s plan, North East councils face a 40% budget cut by 2019 (compared to 2015) while under Labour it would be around 15%, says Coun Henig.

“Labour’s proposals would put an end to the targeting of the North East and similar areas for greater spending cuts,” he said.

“They would mean the abolition of the unfair New Homes Bonus which has taken money away from the North East and redistributed it to affluent councils in the south. And the smaller scale of cuts would mean that the public services we prize, whether support for older people, vulnerable younger people or keeping our neighbourhoods safe and tidy, could continue.

“By contrast, the brutal package of continued cuts outlined by George Osborne in the Autumn Statement have been described as ‘colossal’ by the independent Institute for Fiscal Studies and according to the IFS would take public services back to levels seen in the 1930s - a decade blighted by mass unemployment and poverty when the NHS didn’t exist.

“There is now a very clear choice ahead of us at next year’s general election, perhaps the most stark choice we have faced for a generation.”

Mr Miliband said he would also save £100m by stopping councils to ‘outsourcing’ projects and allowing them to share some services, similar to deals struck between Northumberland County Council and North Tyneside and Durham authorities on HR and IT.

The Labour leader would also call for councils to make “organisational change” to become unitary authorities, as has happened in Northumberland and Durham.

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