Peter Damian https://creativecommons.org/licenses/by-sa/3.0/deed.en

Local councils in Britain have debts of £97.8 billion. Some, like Birmingham, have already gone bankrupt. Experts predict that half of local authorities are heading for serious financial difficulty. The government would like us to blame feckless councils for bad management and unwise investments, just as the Post Office tried to blame hundreds of sub-postmasters for their egregious errors.

The current crisis began with the Tory policy of austerity. After the financial crash in 2008, the Conservative/LibDem coalition that took power in 2010 spent billions propping up the banks and slashed local authority budgets to help pay for it. Government grants fell in real terms by 40% between 2010 and 2020: £46.5bn to £28.0bn at 2023/24 prices.”

Budgets went down just as needs and demand for essential services went up because more people were pushed into poverty as benefits were frozen or cut; because the cuts were applied equally to all councils, those serving the poorest urban areas lost as much as the wealthy Tory shire counties.

The cost of living crisis has only made things worse. Councils are legally obliged to meet the social care needs in their community. Need has risen and so has the cost of services, whether it’s the energy bills in care homes or the increases in the minimum wage — so the government has ‘allowed’ councils to increase council tax by a measly 2% to cover this.

Because councils have to provide for social care and the government controls how they raise the income to fund services, there have already been years of cuts to ‘non-essential’ services like libraries, leisure centres and road maintenance; but the government did relax the rules and encouraged councils to borrow money to invest in money-making schemes. These were not dodgy deals. Manchester has invested in Manchester Airport but suffered from the collapse in air travel during the pandemic. The same thing happened with Luton Council and its airport. Bath Council owns a prestigious property portfolio, but business rents and tourist income are yet to recover from the pandemic.

It is the same story across Britain: dipping into reserves to maintain essential services; borrowing to invest in business ventures to make up the shortfall in government grants; being hit by Covid and the cost of living crisis.

And who do the councils owe money to? The government! The Treasury managed the Public Works Loan Board and took on its functions when the Board was abolished in 2020. The PWLB lent billions to councils for capital investment. Ultimately, it is the government who approved the loans and is responsible for the debt.

Just to place it in context, this £100 billion debt compares to the £300 billion in unsecured loans at present owed by the private individuals in this country, and £200 billion of that is student loans owed to the government. They could write it off tomorrow, end the council debt crisis, and hardly notice it amongst the £2.54 trillion national debt (for the hard of counting, the council debt is £100,000,000,000 and Government debt is £2,540,000,000,000)

During the Thatcher years, socialist councillors consoled themselves that they stood between their communities and the government offensive. They were a ‘dented shield.’ It did not do much good then, and today the Tory offensive has destroyed any possibility of a shield. Labour in office will be no different. Only direct action can save our councils and our services from the predators.


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