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It’s a Brum do: fixing local government won’t come cheap

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Brum bankrupt: the biggest council in Europe is the sixth English local authority to declare itself broke since Croydon in 2020

After the latest local authority’s finances crashed and burned, and with Michael Gove twiddling his thumbs doing nothing before the General Election, ANDREW FISHER, pictured right, looks at what needs to be done to fix local government in England

Councils in England have taken the brunt of austerity since 2010. This has resulted in the closure of local facilities – youth centres, libraries, centres for the retired – and huge cuts in services, even including to councils’ statutory provision, like social care and children’s services.

Just this week, the largest council in Europe – Birmingham City Council – issued a Section 114 notice, the legal declaration that the council is unable to balance its books.

Birmingham thus became the sixth English council to effectively declare itself bankrupt since Croydon’s ignominious crash in November 2020, following Northumberland, Nottingham, Slough, Thurrock and Woking.

As I have written before, more than once, many more local authorities are likely to be added to that list in the coming months.

In each case you can point to local failures. But the inescapable fact is that the Conservative government’s austerity has left councils in a precarious position – without the resilience to withstand local misjudgements, especially in the context of a wider economic downturn.

To date, not a single council in Wales or Scotland has collapsed. Local government is a devolved policy area – meaning it is the Welsh Labour Government and SNP Scottish Government that decide funding levels for their local councils (largely from within the block grant they receive from Westminster).

According to the Institute for Government, since 2010, councils in England have faced cuts in their resource spending of 21%. In Scotland, that figure is just 7%, in Wales it is 8%.

Another notable difference in Wales and Scotland is that they did not follow England in abolishing the Audit Commission.

The Wales Audit Office and Audit Scotland continue to provide an external monitor of councils’ finances, which means better oversight and earlier intervention when problems emerge.

Neat summary: Andy Burnham’s right, of course

Current local government minister Michael Gove is reviving that function in England, with the quango, Oflog.

Yesterday, the Mayor of Greater Manchester, Andy Burnham, tweeted (or should that now be “Xed”?): “Labour councils have run out of money.

“Conservative councils have run out of money.

“The main underlying reason? National government’s disrespect for local government and failure to fund it. It’s gone on for decades under all parties but has hit new levels in the last one.”

He’s right. So what do we do about it?

Higher Council Tax?

It is a common misapprehension that Council Tax funds local services.

In the vast majority of councils, revenues from local taxation amount to a minority of overall council funding, with the majority of funding coming from central government grants.

In lower-income areas, council tax tends to be an even smaller share of revenue (more low-income households exempt), and central government grants have historically compensated for that – as they are, in part, based on an assessment of local needs.

Fund Croydon fairly: Mayor Perry didn’t listen to Croydon when he hiked Council Tax by 15%

Increasing Council Tax is not going to solve this crisis – and is likely to be least effective in poorer areas. As we know in Croydon, where Council Tax was hiked by 15% this year, it has done nothing to solve the crisis: the council is making more cuts this year and continues to rack up debt.

Even deeper cuts are scheduled in Croydon for next year, too.

Across the country, local authorities raised 30% more Council Tax, in real terms, in 2021-2022 compared to 2009-2010. This has been done as they seek to partly offset the significant loss of central government grant funding.

Through austerity, the Conservative Governments have outsourced tax increases to local councils.

People are paying more in Council Tax to get less in return. It’s a very bad deal.

Despite these rises in Council Tax, local authorities are still going bust. It is reckoned that a further 26 English councils are at risk of bankruptcy in next two years.

Bailout?

Croydon’s now non-executive Mayor, Jason Perry, told a Question Time event in Norbury on Tuesday night that he hopes the council will have a deal with government by the autumn. “We are still in discussion with the Government about how we get the finances in order,” he told his modest congregation assembled in Norbury Baptist Church.

The queue of debtors: this graphic, from the Guardian, illustrates that while Birmingham issued a S114 this week, there are plenty of other councils with similar debt burdens, potentially on the brink

We have heard all this before.

In March, when Perry was also – he insisted – in discussions with the Department for Levelling Up, Housing and Communities. Nothing came of it then, and since then Woking and Birmingham have joined the ranks of councils deep in debt and needing bailouts.

If Gove’s department grants a debt write-off, or partial debt write-off, to Croydon, that sets a precedent that a growing number of councils in England will demand to follow, potentially requiring billions from the Treasury.

Increase central government funding?

The crisis in English councils is in large part because of the cut to central government funding – the bulk of councils’ financing.

The Institute for Government reports that: “These grants were cut by 40% in real terms between 2009-2010 and 2019-2020, from £46.5billion to £28.0billion.”

Councils across England are receiving about £18.5billion a year less than they were in 2010. So if you were wondering why your local library has reduced opening times, your bins are only collected once every two weeks, or why the social care package your loved one relies on has been reduced or been taken away, that is why.

Is central government going to significantly increase funding for councils to restore local services and possibly save some councils from collapsing?

The NHS is in crisis, schools are underfunded (and the RAAC crisis has exposed the lack of capital spending, after a programme for rebuilding schools was axed by… Michael Gove).

It all tells the same story: cuts have consequences.

A Labour government looks unlikely to ride to the rescue of local government, since they have ruled out virtually every tax-raising measure to fund it and will inherit multiple other crises in public services and a near-stagnant economy.

Local government reorganisation?

Could councils be abolished?

Hospital pass: has Angela Rayner been set up to fail?

It sounds improbable, but a significant reorganisation and consolidation of councils could be on the cards. Northamptonshire Council went bust in 2018, and was abolished in 2021, along with eight district councils. In their place, two unitary authorities (North Northamptonshire and West Northamptonshire councils) were created. Two of the commissioners responsible for that plan now sit on the Croydon improvement panel, it might be worth noting.

Thurrock Council, a unitary council, issued a S114 notice in 2022 and is now being run by Essex County Council.

If the existing and incoming governments are unlikely to provide additional funding, then a significant reorganisation of local government structures seems the most likely outcome.

This week, in Keir Starmer’s reshuffle, Lisa Nandy was ingloriously demoted as Shadow Secretary of State covering local government.

Her replacement is Labour’s deputy leader Angela Rayner – who, if the polls stay steady, will soon have the reins of a department overseeing failing councils, failing levelling-up and a growing housing crisis. The Rugby World Cup begins in France this weekend, but through the whole of the tournament, we’re unlikely to see a hospital pass as painful as the one just delivered to Rayner.

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