On 5 September, Birmingham City Council (BCC) became the fifth – and largest – local authority in England to issue a section 114 notice, effectively declaring itself bankrupt. Like Croydon, Slough, Thurrock and Woking it will stop spending on anything but statutory services such as children’s services and social care. This situation is ultimately the result of the total capitulation of Birmingham’s Labour council to the pressures of austerity. Its failure to fight back at any point has come home to roost, as it is exposed as not just fiscally but also politically and morally bankrupt.
Councils under the cosh
The council, which serves more than one million people, faces a shortfall of £87m on its £2.2bn budget for the current financial year, projected to rise to £165m in 2024-25. This is the result of the long-term fall in BCC’s income (by £230m from 2010-2020), which it claims has been exacerbated by the £760m owed in equal pay claims, caused by underpaying those in traditionally female roles compared to those in traditionally male roles – something the council has had 11 years to sort out. The council also blames a botched Oracle IT system costing £100m to put right, as well as rising prices, inflation and decline in business rates during the Covid-19 lockdowns.
Undoubtedly, since 2010 local councils have come under the cosh of savage austerity cuts and the absolute determination of the Coalition and Conservative governments to divert council spending from directly meeting local need into profit-making activities. Central government funding to local authorities has been slashed by about 50% nationally since 2010. To compensate for this, councils were ‘encouraged’ (read, ‘forced’) to take out loans from the government’s Public Works Loans Board and to work with private companies. Through a number of semi-privatised front companies, councils then invested this money, largely in private housing and construction companies. In Birmingham, the BCC’s loans and investments were managed by Birmingham Finance Ltd, a wholly council-owned private company. This has essentially been a means of channelling public money back into the private sector, with little benefit for the majority of the people the council is supposed to serve. At the same time, property prices have been falling, adding to council losses. This was accompanied by the fact that councils have had to change the way they manage their accounts, with all property valued as commercial assets and prepped for sale to generate funds and meet budget shortfalls. The result has been that an estimated 75,000 public assets worth £15bn, including community centres, libraries and swimming pools, have been sold by cash-strapped English councils since 2010, according to the Institute for Public Policy Research (21 September 2023). Alongside this has been the pressure to expand the council’s commercial activities in order to raise more revenue.
The Business Retention Scheme
Local councils have been able to retain parts of the local business rates – the equivalent of council tax for businesses. The amount is tied to the rental value of a business which is, in turn, tied to their profitability. These rates used to go directly to central government which would then parcel them out to local authorities. Since 2013 the portion of business rates that local authorities can retain has been increasing, with Birmingham being part of a pilot to retain 100% of its local business rates since 2017-2018. This has prodded BCC to prioritise commercial ventures and so the profitability of big business partners over the needs of Birmingham’s working class. It is a political, so ideological, as well as an economic attack.
Labour offers no resistance
The reality is that BCC’s Labour council has never made any serious attempt to resist austerity, for example by refusing to set no-cuts budgets or fight to build social-rent homes, (see ‘Savage cuts ahead as Labour councils swing the Axe’, www.frfi.org.uk, November 2022). Instead, swathes of council housing were sold off to private development companies. In 2015, Birmingham National Exhibition Centre – described as the city’s ‘crown jewels’ was flogged off to Lloyds Banking Group for £307m – ostensibly to help BCC settle its equal pay claims.
BCC’s Labour leaders have instead capitulated to this push towards capitalistic development and market mechanisms. In this way, Birmingham’s economy has grown by 36% since 2019 to £29bn and the city has attracted the most foreign investment outside London (Financial Times, September 2023). HSBC and PwC have moved their national headquarters to Birmingham. The council has given planning permission to high-end business development on Broad Street to bolster the ‘night-time economy’, as well as luxury high-rises in the area and luxury homes in the Icknield Port Loop. BCC insisted on the development of the HS2 railway so it could transfer better-off workers from London, seducing them into the finance sector, with fancy bars and homes to live in. Meanwhile, child poverty levels rose to 45% in 2021.
A firesale of public assets
On 28 September, the cynically-labelled Levelling-up Secretary Michael Gove, announced that government-appointed commissioners would arrive in Birmingham ‘within days’ to take over the running of the council’s finances. Job losses, higher council tax, further reductions in council services and what has been described as ‘a firesale of public assets’ will undoubtedly follow. Fears have been raised for the future of the city’s library (which, according to The Guardian includes the largest Shakespeare collection of any public library in the world), as well as Birmingham Museum and Art Gallery. The BCC has a property portfolio valued at over £2.4bn – including the largest council housing stock in the country, and 26,000 acres of land across the city. All this public property is now at risk of being flogged off rapidly and cheaply to private owners to balance the council’s books.
According to research by the trade union Unite, a string of councils in England, Scotland and Wales are likely to follow this dark path in the coming period, with 114 of them – nearly a third – facing budget gaps of more than £10m. Without a sustained struggle against the further cuts in housing, jobs and services that are to come, the consequences for the working class will be grim indeed.
Joe Smith
FIGHT RACISM! FIGHT IMPERIALISM! 296 October/November 2023
