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The Weekly paper of the New Communist Party of Britain

Facing a bleak future

by New Worker correspondent

Many councils are teetering on bankruptcy in England. Since 2021 six local authorities have declared themselves effectively bankrupt. In January a poll of English councillors by the Local Government Association reported that a quarter of councillors expected their council to follow suit.

At a time when central government has cut funding by 40 per cent between 2010 and 2020 in real terms councils are facing greatly increased demand for statutory services such as social care for adults and children to say nothing of temporary accommodation and homelessness support.

These cuts have left councils more dependent on funding from the locally raised council tax and business rates. These do not make up for the drop in central government support. Local authority spending power has effectively fallen by 17.5 per cent between 2009-10 and 2019-20. Even with the extra Covid-19 funding it was still 10.2 per cent below pre-pandemic levels.

The extent of the crisis can be surmised by the fact that there were more section 114 notices (warnings from council finance officers which report they are nearly bankrupt) in 2023 than were issued in the entire 30 years before 2018.

The Tories blame workers for having the outrageous impertinence to expect decent wages and their unions for calling their members out on strike. But the Institute of Government (IoG) notes that, being labour intensive organisations, councils are highly exposed to rises in the National Living Wage (NLW), this will rise by 9.8 per cent in 2024/25, after increasing by 9.7 per cent in 2023/24.

Another less talked about problem is the recent increase in interest rates. Now libraries and swimming pools are being closed so that international bankers can buy new yachts.

The late 2023 finance settlement for local government did not take sufficient account of inflation. Local authorities’ 2024/25 spending power is now 4.7 per cent lower than if inflation had not increased in 2022.

The IoG also makes the predictable point that since 2010 Conservative Government cuts have fallen most heavily on the most deprived local authorities, which is understandable from their point of view as they do not normally vote Tory. This was slightly reversed just before the pandemic but it has now has reverted to form and last year’s settlement was distributed with little regard for need.

This has led to devastating cuts for council services on whom many depend. Or as the IoG puts it: “By abandoning the redistributive approach of recent finance settlements, the government could therefore further squeeze the finances of local authorities that are already seeing some of the most intensive demand pressures”.

According to Michael Gove, the Minister of Levelling Up, Housing, and Communities, the root cause is easy to find: it is mismanagement by councillors and officials. This has indeed been the case in some councils such as Thurrock and Woking which made foolish investments. But most of the bankruptcies are due to more mundane matters. The largest one so far is Birmingham which has been blamed on an equal pay case resulting in previously underpaid workers getting long overdue back pay.

At Nottingham even critics acknowledge that it was due to insufficient funding at a time of rising demand for social care services. When private landlords turf people out in favour of those who can afford to pay higher rents, it is the council who has to rehouse the unfortunate evictees.

While local authorities are rarely models of efficiency it is underfunding from central government which is responsible for their failures. The IoG sagely observes that “the margin of error for council mismanagement is now paper thin. A council might have been able to absorb the cost of a management misstep in 2010 by making savings elsewhere in its budget. In 2023, that same misstep could force an authority to issue a section 114 notice”. While some of the bourgeois of Birmingham will be up in arms about cuts to the city orchestra it is the unemployed and homeless who really suffer. No Christmas lights are the least of it.

Apart from cuts to services, rising costs of using sports centres deter users resulting in greater health costs which will be a burden on the NHS.

Some county councils such as Kent and Hampshire have called for a reduction in the statuary obligations on councils, which will only make a bad situation worse, but then there are always food-banks.

Allowing councils to raise more money by giving them more leeway over Council tax and Business Rates is unlikely to be popular among those voters who would have to stump up for council services.

The IoG argues that uprating property values is long overdue as the council tax system is highly regressive and is still calculated using property values from 1991. That is hardly a revolutionary demand, and it would only require the Government to implement its own 2016 Fair Funding Review, which would update funding formulae to direct more money towards the most disadvantaged parts of the country, but the landed gentry don’t want to see any more funding going to the inner cities.

In Wales the picture is also bleak, despite the devolved government cuts in other departments areas going some way towards protecting local authority services and the NHS. These cuts have already brought the staff of the National Library of Wales out on strike.

The Welsh Local Government Association tugged its forelock and commented: “These are not easy decisions, and we would support the minister in protecting local government core funding in 2023-24,” before warning that: “The funding available will not cover it all and we face a considerable funding gap.”