Britain's councils are going broke
BY BENJAMIN SACHS
Earlier this year Birmingham city council filed for ‘Section 113.’ Beneath the over-complicated legalese the meaning of this is quite simple - Birmingham council, responsible for services for 1.3 million people, is essentially bankrupt. For the Conservatives the narrative that can be spun is clear: Birmingham is a Labour-run city council that was driven into bankruptcy - vote for Labour in 2024, and the same will happen to the rest of the country.
Unfortunately, the same is already happening across the country. Birmingham’s city council has certainly contributed greatly to its own issues. It owes some £750 million to employees who won an equal pay case at an employment tribunal in 2010. Meanwhile its hosting of the Commonwealth games in 2022 is, in hindsight, a bizarre move for a cash-strapped council. However similar problems have affected other councils: take Conservative-ran Thurrock council who went broke after loaning £600 million to Liam Kavanugh to invest in solar farms - he instead chose to spend £12 million on a private Jet, £2 million on a Bugatti and £16 million for a yacht. They filed for section 113 in December 2022. In fact, according to the Special Interest Group of Municipal Authorities (SIGOMA), a local government association, some 10% of English councils have considered a section 113 for the next year and 20% view it as possible they will need to next year.
Councils have been faced with considerable financial strains in recent years. Upper tier/ unitary authorities (these are just councils that deal with ‘bigger’ jobs such as social care, education, health and transport) have been under strain as adult and child social care becomes more expensive (in part because of government efforts to treat child social care with the same importance as adult care). Councils were forced to support their communities through the pandemic at huge expense, and many were not compensated by the Government. Finally, the recent inflation in wages and energy costs have contributed costs of £2.4 billion more than anticipated to council costs in 2023/2024.
But the current crisis in England’s local government is not simply due to circumstance or short-term issues. In truth, local councils have been under huge strain for a long period. Following the Great Recession in 2008 and the election of the coalition government in 2010, government grants to local councils have been cut. Government grants fell by 40% in 2021/2022 compared to 2009/2010. Councils have always been a natural target for Conservative governments (as the Poll Tax proved) - the traditional Tory middle classes pay council taxes, but aside from often unreliable bin collection see little of the benefit (as many council services generally benefit the poorest).
However, It would be lazy to blame the Conservatives for the issues entirely. In truth, the issue is that Britain is hugely centralised. In places like Germany, 32% of taxes are collected locally; in the UK this is only 7%. Councils do have powers to raise money through council tax and business rates. However, the 2011 Localism Act means councils cannot raise council tax by more than 5% per annum without a referendum. Councils cannot borrow money for their day-to-day endeavours and must have a permanently balanced budget. Additionally, plans to raise the amount of business rates income kept by councils to 75% were shelved by the Sunak government in April. This huge centralisation of financial power leaves councils dependent on government grants, which have not only been slashed in the past 13 years but are increasingly one-year settlements making financial planning impossible.
The work that councils do - aside from bin collection - is often not seen by many. However, despite the ever-lower funding, they have done a remarkable job providing a huge range of services. It is estimated they run 2727 leisure centres, more than half of the 27,000 parks across the UK; they run social services, support the NHS, manage local transport and buses - the list is almost endless. As such, when councils go bankrupt the consequences can be severe. In Thurrock council tax went up by 15% and council services were also cut. Councillor John Kent described, "we've seen dirtier streets, grass being cut less frequently, our only theatre is now under threat and every subsidised bus route in the borough was just cancelled."
Councils have done a remarkable job managing austerity, but they can’t juggle forever. If whoever wins in 2024 doesn’t loosen their grip on our regions, giving councils the powers to support themselves, and also increase the support for councils drastically: more bankruptcies, worse services, and worse bins awaits us all.
Image: Wikimedia Commons/Elliott Brown