WEARSIDE’S leaders have launched a fight against plans they say risk driving away business and jobs.
Ministers are planning a shake-up of council funding aimed at making local authorities more independent of Whitehall.
The focus is on making councils more self-sufficient – keeping cash from business rates rather than relying on Government funding.
But council leaders say the plans could have dire unintended consequences for the North East, which has greater demand on its services while at the same time lacking the booming business sectors of London and the South East.
They fear changes could also see wealthier areas able to drop their business rates and attract business away from poorer areas which could not afford to do so, leading to a “spiralling gap”.
Movers and shakers met in the House of Commons yesterday where the Association of North East Councils (ANEC) launched a report highlighting its concerns and calling for the Government to think carefully before making changes.
ANEC chairman and Sunderland City Council leader Paul Watson said: “We really do believe that any new system should be based on principles of fairness, equity and need so the resources available to our 12 councils does reflect the needs of our communities.”
At present, business rates are collected locally and paid into a central pool. Councils then get a share of the cash depending on their need.
This means wealthier areas such as the City of Westminster effectively cross-subsidise more deprived places such as Sunderland.
Durham County Council leader Simon Henig said changing this system risked reallocating resources to the wealthiest areas, with the “rich getting richer” while the poor areas suffer most.
He said: “We cannot underestimate the importance of this review of local government finance for communities across the North East.
“If the issues we are highlighting are not adequately addressed, important services such as health and social care, could suffer.”
The ANEC report found Government spending cuts had seen the North East lose £80 per resident in funding, compared with the national average of £47.
The report also gives examples of how North East councils face a higher burden in terms of services than those in the South East.
Sunderland has 34 neighbourhoods in the top 10 per cent most deprived areas in the country, equating to 50,000 residents.
Sunderland Central MP Julie Elliott said: “We need to look very carefully at the potential impact on areas such as the North East of any changes.”
Houghton and Sunderland South MP Bridget Phillipson said: “There’s been concern for some time about what changes to Government funding will mean for Sunderland, and we have raised this in the house many times that the way in which it is being done is unfair.”
The ANEC panel stressed that the Government had given certain assurances for the short-term and welcomed news that there would be some form of “equalisation” in the new system, but they said no real details had been announced.