After more than a decade of deep cuts to local government spending, English local authorities (LA) face bankruptcy. Over half of them are in serious financial difficulties, and ten face financial collapse. The long-running attack on the previous gains of the working class demonstrates the pressures on British capital to increase its rate of exploitation of ‘hard working families’, while abandoning those out of work. The aim is to scoop up every ounce of employees extra output into the hands of capital. JAMES MARTIN reports.
The pivotal principle of the ruling class is to reduce any spending by the mass of the working class to the lowest possible individual or family wage. Between 2009/10 and 2019/20 central government grants to local authorities (LAs) were cut by 40% in real terms. Overall, LA spending in 2021/22 was thus 10.2% below 2009/10 levels, despite the total council taxes doubling since 2010. At the same time central state welfare spending was pared to the minimum. Low spending is enforced by restricting LA revenue raising powers.
More than 1 in 5 people in the UK (22%) were in poverty in 2021/22 – 14.4 million people. This included: 8.1 million (around 20%) working-age adults, 4.2 million (nearly 30%) children, 2.1 million (around 17%) pensioners. Poverty rates returned to around their pre-pandemic levels, after temporary coronavirus-related support was withdrawn. Central to this increasing misery are the day to day cuts in local spending.
The slightest local attempt to reject centrally-dictated cuts has been repeatedly banned by laws from 1834 to 1999, with surcharges and disqualification for rebellious councillors in the 1973 and 1985 rate protests. Embarrassed by such public punishments, the Labour government in 2000 arranged for rebellious councillors to be more quietly supressed through an Adjudication Panel for England.
There are 317 local authorities in England, of five types: 21 county councils and their 164 district councils, 82 unitary authorities, 36 metropolitan districts and 32 London boroughs, controlled by the Greater London Authority (GLA). The City of London and the Scilly Isles are the other two LAs. These bodies must hand over about half of their business rates income to the government in return for a varying but tightly controlled ‘rate support grant’. This was 68.8% of their £117.5bn spending in 2023-4, itself dispensed through narrow executive structures imposed by the Local Government Act 2001, which limit the provision of housing, transport infrastructure, environmental protection and community facilities.
Managing poverty
The ruling class media constantly condemns the working class as ‘work-shy’ for needing basic services, so ‘causing’ overspending. In January Michael Gove, then secretary of state for ‘levelling up’, called on councils to cut ‘wasteful’ spending on ‘discredited equality, diversity and inclusion programmes’. Rishi Sunak’s April ‘sick note culture’ speech reiterated the meme. In November 2023 the County Councils Network warned of ‘out of control’ increases in child care as threatening ‘one in ten biggest councils’. Yet funding for special needs education for children, frozen since 2013, has shrunk with inflation, and from 2011 to 2021 English LA spending on youth services fell from £1.48bn to £379m. Chancellor Jeremy Hunt’s tax cuts in both his November and March statements, if maintained by the new government, will lead to at least £467m more being stripped from adult care services in England from now until April 2026 and Council’s ‘high needs’ deficits will hit £3.6bn by 2025.
Seizing public assets
The Tory government’s 1988 Local Government Finance Act, untouched by the next Labour government, aimed to remove assets from local governments. This introduced Section 114, forcing councils to issue deficit warning notices if running current deficits, and then self-imposing spending cuts. In 2000, Hillingdon, Brent, Lambeth, Camden and Hackney councils were the first to issue Section 114 notices (S114). In 2018 Northamptonshire County Council declared effective bankruptcy, was broken up in 2021 and replaced by two new councils. From 2010 years of cuts to revenue support grants followed. The 2010 ‘Localism Act’ gave LAs freedom to sell off public property or cut services.
By 2021, 25 authorities of all sizes faced financial crises. Eight faced government spending reviews. In 2016, due to an ageing population, the government was compelled to allow a 2% adult social care ‘precept’ on top of the council tax cap, continued into 2024-25.
Croydon issued S114 notices in 2020, 2021 and 2022 and was permitted a 15% council tax rise in 2023. In 2021 Slough issued a notice. Nottingham issued notices in 2021 and 2023 but must still stick to a 4.99% limit, set in 2023, in council tax increases. Northumberland’s came in 2022. By 2023 serious budget difficulties faced Bexley, Copeland (abolished 2023), Eastbourne, Luton, Peterborough, Redcar & Cleveland and Wirral. Birmingham issued an S114 in 2023. In February, along with Thurrock, Woking, Croydon and Slough, it was permitted a 9.9% rise in council tax for 2024-25 without triggering the obligatory referendums designed to restrain spending. Over the years LAs slowly used up reserves, borrowng more and so increasing the interest paid, while selling off public property. Since 2010 Britain has lost 279 playing fields, 673 public toilets, 750 youth centres, 793 playgrounds, 800 libraries, 926 football pitches, 1,083 swimming pools, 8,000 bus routes and 1,416 Sure Start centres.
In mid-2023 the average council faced a £33m predicted deficit by 2025/26, a rise of 60% from £20m in 2021. By March 2024 UK councils owed a combined debt of £97.8bn to lenders. Councils expect £5.2bn of deficits by April 2026 after making £2.5bn of planned cuts, to reach an enormous £57bn by 2028. Kent, Hampshire, Coventry, Somerset, Guildford, Kirklees, Southampton and Dover have all warned that during 2024/25 they may have to issue S114s. West Berkshire faces financial meltdown. In March, Sir Stephen Houghton, chair of the Special Interest Group of Municipal Authorities, said: ‘It is no longer about a few councils being in jeopardy – it is the whole sector’.
Real wages in most LAs are lower than in 2008. Since the May 2024 local elections, new Labour, Liberal Democrat and Green councillors face demands to save these services and public property, a task they cannot do. The financial intransigence of central government is not just ideology. The anti-state spending obsession of the privatising camp is a direct outcome of the desperate lack of profitability relative to the mass of capital employed. From the 1980s, councils have been continuously debilitated financially, and residents’ services have inexorably been cut back. LAs now plan to sell off, or sub-contract to the private sector, more public assets such as libraries, parks and public sports centres.
Blaming the abandoned and the old
‘Statutory obligations’, especially in health, housing and education, are now commonly fulfilled by profiteering private subcontractors, make up almost all the expected overspend in the coming year. Shockingly, children’s residential care is now almost a monopoly of private equity investors. Highly profitable private firms charge huge sums per week for childcare. Forced to hand over their services to a new class of ‘private providers’, local authority budgets have been sucked dry. Hundreds of ‘care providers’, often newly formed companies, uninspected, even unregistered with the Care Quality Commission, are granted licences to employ and exploit migrants. The Home Office has licensed a surge of new care workers because so many EU workers left after Brexit. The number of non-profit nurseries has collapsed by 23% in four years, so that the trumpeted ‘free nursery’ hours expansion this April is undeliverable. Investment funds have doubled their stake in the nursery business in this period. Now in a ‘seller’s market’ these companies will simply siphon off money. There was a 48% fall in local government spending on early intervention services between 2010 and 2020. Many children are now malnourished. In the provision of adult care, local authority ‘old people’s homes’ have been closed and sites sold off to the private sector.
In all this, the political safety function performed by charities, which in 2022 saw a combined value of volunteering and donations come to £23bn, is undermined as local authorities can no longer contribute to them.
Stunting democratic choice
With less revenue to spend, and so to discuss, democratic debate on allocation becomes irrelevant. The removal of the limited democratic gains of the now past era of historically progressive capitalism, accelerated from the 1980s, via the abolition of the Greater London Council in 1986, to forcing LA schools to convert to business-dominated Academies (Academies Act 2010). The political limits to bourgeois democracy are graphically displayed. Business models were imposed over the previous governance structures. Executive decisions replaced wider voting chambers, undermined a previous limited local democracy, from council chambers through to school governing boards, speeding pro-private-profit business decisions, speculation and corruption.
Labour leader Keir Starmer said that he couldn’t ‘turn the taps on’ to solve this crisis if he won office. No doubt he will now keep his word. 85% of councils of English local authorities plan deep cuts to services eg waste collection, road repairs and libraries, even with the maximum 4.99% possible council tax increases now permitted to remain financially solvent.
The state has imposed a privatised model of operations. The Thurrock and Woking crises were the result of the fantasies of councillors desperate to raise income, blindly fascinated with speculative property ventures. In Thurrock this was blatantly in breach of the law, and was covered up.1 Thirty-six local authorities have been subject to corruption investigations since 2013, for fraud and misuse of public funds. With compulsory private auditors, effective direct council control is weaker. Ninety-nine per cent of English councils failed to have their 2022/23 accounts signed off by last year’s deadline.
The 2023 Autumn Statement saw ‘unprotected day-to-day departmental spending’, covering local authority funding, reduced by 2.3% per year in real terms from 2025/26, confirmed in the March budget. However, in November, the political crisis that 14 years of austerity has created, and the then nearing general election, forced the government to allow council rate rises worth an extra £4bn across England in 2024/25, with a maximum increase of 4.99%. It announced an extra £600m in January, after intense pressure. This has not stopped central government commissioners forcing Birmingham, Britain’s second largest city, to announce in February cuts to almost all its funding for the arts and music over the next two years, then in March, further sales of 11 community centres, shutting 25 libraries, and dimming street lights.2 Non-mandatory services including leisure centres, pest control, museums, and youth clubs, are discretionary, meaning councils can choose whether to offer them or not.
Desperate measures
As an alternative source of money, councillors in Labour-run Southwark this February have desperately resorted to using a crowdfunding scheme called ‘Abundance Investment’ to raise £6.7m ‘risk capital’ over the next six years for various urgent social expenditures from any willing investor. The target is £1m for 2024/25 with a 4.6% return for investors over five years. This will be at cheaper rates than local authorities’ standard provider, the government’s current Public Works Loan Board. Since 2010 Southwark has lost £210m of central government funding. This ‘Abundance’ scheme manages other funding programmes for English local authorities, starting with Warrington in 2020. Nine local authorities including West Berkshire, Camden and Cotswold district council have launched crowdfunding drives through this platform. The endless game of chasing money and paying interest to predatory providers has no future. Effective, democratically managed planning across the whole system, transformed to meet the rights, the expressed needs, of the working class, is the only solution.
- https://tinyurl.com/5bu73uy
- See FRFI 296, October/November 2023, ‘Birmingham’s bankrupt council’.
FIGHT RACISM! FIGHT IMPERIALISM! 301 August/September 2024
