On Saturday I promoted a comment to a blog: it promoted the idea that local authorities should issue bonds to finance the building of new social housing.
I was asked why local authority bonds has disappeared and offered the response I usually do, that this was because of Thatcher's policy of limiting their opprtunity to borrow as part of her drive for monetary control. One of this blog's long standing friends, Open University academic Ivan Horrocks, took issue with me. I think his response is worth sharing in full because of the much broader issues involved:
It was not just about controlling government borrowing, Richard. Indeed, far from it, though that became the excuse, which, as with austerity, was used to deflect attention from the real reason.
It was because the Tories — and Thatcher and her acolytes in particular — were scared that local authorities had the powers at that time to develop and implement policies across a range of policy domains (housing being only one, education and the delivery of many local services also) that ran counter to the neoliberal policies central government wanted to ram through. And you may remember that a variety of local authorities attempted to stand against central government policies of the time.
Indeed, if you read any of the text books on local government produced through the 1980s and early 1990s they contain a great deal of discussion on the different types of local authority that were emerging as a result of central government policy (note: I taught British Local Government to undergrad students in the mid and late 1990s having worked in and around local government from 1988). One of the features of these models was that it was assumed that even given the policies of the various Tory governments of the time local authrities would continue to posses considerable autonomy over certain policy areas. Sadly, this assumption was wrong as New Labour also implemented various policies to further control and neuter local government, rather than reverse those the Tories had spent many years implementing. And of course, along come Cameron and co and under the austerity banner double down even more.
In short, for approaching 40 years central government has done all it can to undermine and control local government to such an extent that in reality there's very little that's autonomous and local about anything much local authorities do nowadays. They are, in the main, the servants of central government. Were this not the case and we had a system such as exists in France, Germany, Italy or even the US I've no doubt we'd see a burst of innovation in many policy domains, housing being only one, and a reflowering of local democracy too. But by definition that would expose central government policy for what it is — lame dogma — and also the lack of intellect and shallowness of most of the politicians who make it into government, and the self-serving nature of almost all senior civil servants. And shining a light on that aspect of our society would never do, would it.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Bravo, Ivan. Clear and succinct.
“But by definition that would expose central government policy for what it is — lame dogma — and also the lack of intellect and shallowness of most of the politicians who make it into government, and the self-serving nature of almost all senior civil servants. ”
Yes.
I’m no academic, but I will offer you a different take on this.
My wife was, in the late 1970s, the sterling Treasury dealer at Unilever. She had a broad range of investment options open to her, but there was a flat prohibition on purchasing local authority bonds. The rationale for this was that the management of these bonds was not up to prevailing commercial standards, and it was recognised that if something went wrong, it would be exceedingly difficult not to lose heavily.
I’m quite happy with the idea that a centralising government wanted to reduce local authority powers, but I’m pretty certain that this played into it.
But they had not and did not default….
@ James Mac, my comment was directed at Richard’s ‘controlling government borrowing’ statement, rather than in relation to local authority bonds specifically. I’ve no doubt that there were factors such as you note that impacted on them.
It’s also worth adding that as someone who worked in and around local government in the Welsh Valleys and Greater Manchester, as well as Nottinghamshire, and has been lucky enough to be involved in research over the past twenty years that looks at developments in many other local authorities, both here and abroad, I wouldn’t want to give the impression that everything that happened in British local government was innovative and effective, or indeed in some cases even that good. It wasn’t. But the important point is that even into the early 1990s the freedom existed for local authorities – by which I mean of course the officers and politicians who ran them – to experiment and innovate and good stuff came out of that, often regardless of whether the council was Labour, Tory or LibDem controlled. Or, to quote some of the leading scholars of local government of the time when commenting on developments seen in the late 1980s early 1990s: ‘they are all examples of local councils freely deciding to do something differently from how it was being done before, differently from what other councils were doing, and not merely in response to any central government demand or requirement.’ (Wilson and Game, Local Government in the UK, 2nd Ed, 1998:17). Sadly, almost everything local government now does is as a result of or in response to a central government demand or requirement. Hence it’s questionable that what we really now have in this country is local administration, with a regular sprinkling of local elections to give the impression we still possess local government.
It’s not actually illegal for local authorities to issue bonds now. Warrington issued £150m worth earlier this year. It’s just not very common, partly because of borrowing limits (now locally set), partly because of lack of (revenue) funding, partly because it’s very difficult for local authorities to do anything in the housing field that isn’t subject to tight controls.
You are (both) right about the obsessive centralist culture in government though. Just this morning we have seen the Government send letters to four councils saying that they can’t produce a newsletter more frequently than four times per year. That is apparently a higher priority than the tidal wave of challenges facing the country.
During the 80’s, 90’s & 00’s I worked in regionally based Civil Service and watched the systematic emasculation of Local Authorities to the point that the use of the word ‘Authority’ was questionable. Certainly the various Regional Government initiatives by different administrations lubricated this process. The development of career politicians within the national parties and the demise of MPs from Local Authorities as well as Trade Unions was another factor which meant that Westminster had less and less understanding of what LAs did beyond being obstructive to Government Policy. In the Civil Service we knew that the sure sign that LAs faced more restrictions or removal of responsibility for services was when the PM or members of the Cabinet stood up in the House and described their latest initiative as “improving/enhancing local democracy” it remains the same!
In the late 1970s apparently Chris Pattern was commissioned by the Conserative Party , to do some research to see how the perception and identity of the population of the uk could reengineered to make it more favourable to themselves. They knew at the time that they then had a solid base of about 35% of votes and reasoned if this was increased to 40% then they could be in power indefinitely given the corrupt and antiquated electoral system. The means to do this they reckoned was to make more people property owners, to make people more self interested individuals less inclined to common interests. They gained power in 1979, then fire sold the best council housing stock, Bribing a selection of people with wealth belonging to us all. General Pinochet admired this,as he would, as this policy of making the population house owners originated from Genera Franco, burden people with morgage debt and they are made more passive. Not that many did not benefit from buying undervalued housing, though some suffered during downturns as they failed to keep with morgage payments. As a political project it has been an outstanding success but with unfortunate social consequences.
Housing is now been reduced to becomming monetised, its asset values, subordinating use and needs value. It seems that house prices have raced far beyond background inflation and income rises. Rents have raced up following house prices. Banking loves this, its relativly easy to milk income and extract asset value. At most times its a win for them which ever way it goes. It the morgage holders defalts the banks repossess. They have benefited by the mad housing inflation that has left many behind with a depleted social housing to fall back on, or dependant on housing benfits subsidised landlordism.
I also agree that the local government has been thoroughly disembowelled and we are now in a feedback loop of declining powers and declining democratic participation. The directive of no more than four newsletters a year is micromanagement plain and simple. But of course central government currently (but for how long) provides most of the money and never consider that they are funding local democracy. Indeed West Somerset Council voted this year to abolish itself (‘merging’ with Taunton) – one of the councillors said something like “We are a financial liability are we not?”!
What a pity the current government couldn’t come to the same conclusion about themselves.
Neither did the media ever help with local authority individuality as differences between them were so often ridiculed with the ‘postcode lottery’ smear.
Powerful stuff from everyone here, enlightening and understandable.
For one who had lived outside of the UK for a couple of decades I really appreciate reading such solid opinion and expertise.
Thank you all, especially Richard for hosting it
This proposal doesn’t take account of the new council housing financial system introduced in 2012, ‘self-financing’. 136 local authorities were burdened with £13 billion bogus debt which their tenants have to service through their rent payments. Given the fact that Housing Revenue Accounts are not subsidised, any additional debt would simply be loaded onto existing tenants. Since the only income for HRA is tenant rent and service charges, increased debt would mean that the money avaiable for the maintenance of our homes (which is already insufficient) would decrease.
A more radical proposal that Swindon Tenants Campaign Group is pushing for is for the so-called council housing ‘debt’ to be written off/cancelled. This would provide hundreds of millions of pounds a year to local authority HRAs since they would have no debt and interest payments to make.
This council housing ‘debt’ which was the product of ‘creative accounting’ by the Treasury, forms part of local government debt held by the Public Works Loan Board – around £68 billion.
I agree with Richard that Labour should not tie themselves to a ‘balanced budget’ over a parliamentary term. But if they wanted to do something genuinely radical they could cancel that £68 billion debt. The cost would be, in terms of the economy overall, quite managable; around £5 billion a year (which is the current payment of interest and principal to the PWLB by local authorities). It would transform the circumstances of local government, and end the ‘need’ for the draconian cuts which are being carried out as a result of central government grant being phased out.