As the Guardian notes this morning:
At least 26 councils in some of Britain's most deprived areas are at risk of effective bankruptcy within the next two years, according to a leading local government group, which says many authorities simply have “nothing left”.
Britain's local government network has been shaken by a string of financial collapses in the past two years, starting with Slough and followed by Croydon, Thurrock and most recently Woking, which announced a deficit of £1.2bn in June after a risky investment spree.
The quartet could be only the tip of the iceberg, according to a survey of 47 councils in northern England, the Midlands and on the south coast, which revealed mounting anxiety that rising costs will blow irreparable holes in budgets that fund crucial local services.
Why is this? As the article adds:
Councils said the most common cause of financial pressures was increased demand for children's social care services after the government said these should be given equal priority with adult social care and funded accordingly.
Other significant factors cited were sky-high inflation costs and related wage rises, the local authorities warning that an imminent increase in the cost of borrowing would add to the financial pressure they face.
So, it is austerity in the form of unfunded spending demands and the failed interest rate rises of the Bank of England, that are bringing local authorities down.
This is imminent government implosion as a consequence of government policy failure.
You could not make this up. Only the Tories could manage this.
Although Labour appears to have no plan to address the issues.
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:
Although I agree with much of what you write, this statement is grossly unfair:
“Although Labour appears to have no plan to address the issues.”
They do have a plan, it is the same as the vile-tories plan, “there is no money, markets (& growth) are the way forward, can I please lick your shoes Mr Murdoch,…… please?”.
vile-Liebore is vile-tory with the thinnest of sugar coatings. Vile-Liebore supports child poverty and wants the rich to get richer, and in both cases, supports policies to ensure these realities continue.
In the case of local councils – which embody the principle of local representation and thus involvement of citizens in what passes for the democratic process, vile-tory/vile-liebore policies over 44 years have deliberately undermined the ability of local gov to fund itself – (the same happened in France btw) – both parties are, at their core, anti-democratic, & one can see that by their actions (words mean nothing in this context) against local gov over nearly 50 years.
National Audit Office analysis has shown that local authority expenditure is far more efficiently managed than the Whitehall programmes. This statement by head of the NAO, Gareth Davies summarising last year’s report on supporting local economic growth is representative: “The Department for Levelling Up, Housing and Communities has not consistently evaluated its past interventions to stimulate local economies, so it doesn’t know whether billions of pounds of public spending has had the impact intended.
If a Government wanted real and radical reform of service delivery a good starting place would be to increase the powers and responsibilities, budgets and capital raising abilities of Local Authorities. If councils managed the budgets for the NHS and schools, there would be less waste and a far greater chance that the total of public spending within localities delivered.
And housing. Right to Buy lies at the core of the so-called housing crisis.
There are inherent problems with local authorities having more generalised responsibilities for services and tax raising powers. These problems are largely related to the ability to pay. It is far easier for the local population to fund additional spending in Kensington and Chelsea than it is in Knowsley. If you want to go down the road of local management of local services you will also need more redistribution between councils.
Agreed
Local government must be one of the most misunderstood arms of the state. Even knowledgeable and erudite posters on here are way off beam.
For the vast majority local government is no more than emptying the bins, cutting the grass and fixing (or not) the potholes in the road. Yet in reality this is a miniscule proportion (perhaps 25%) of what local government actually does.
The bulk of local government spending is on doing the states “dirty work” – adult social care, children’s social care and to a lesser extent housing (covered expertly by PSR elsewhere). Between these three you are probably looking at some 75% of a local authority’s budget and resources. Both adult social care and children’s social care are statutory duties imposed on local authorities by Acts of Parliament (The Care Act, The Children Act and to a lesser extent the Mental Health Act and the Mental Capacity Act). Local authoritites cannot turn round and say “sorry – we can’t afford your care package” – that doesn’t wash with either the Ombudsman or the courts – there is a statutory duty to ensure needs are met. And it is bloody expensive.
In my own service area I can think of half a dozen people whose care packages combined come to over £1 million per year. That is for six people. Care home fees since Covid have rocketed – from circa £500 per week to around £800 per week and even at that level care homes are stuggling to provide care at a safe staffing level. Similarly hourly rates paid to care workers which is the bulk of what we do. And we are really struggling to provide care as the agencies cannot attract staff at the rates local government are able to offer.
Back in the day of Nick Ridley and the rate cap things were very different. People with a learning disability and highly complex needs were locked away in long stay hospital funded by the NHS. Care in the Community (and more recently the Transforming Care agenda) thankfully put an end to that but (as noted above) supporting such people to live safe, fulfilling lives in a community setting is extremely expensive. Similarly the last 40 years has seen a great improvement of the health outcomes for older people with dementia – 40 years ago most would die before needing specialist care, now care home and assessments under the Deprivation of Liberty Safeguards (another huge expense) are huge pressures on local authority budgets and staff.
As statutory duties placed on local authorities by Parliament then surely Parliament should also have a responsibility to authorise sufficient funding for local authoritites to provide these services. Yet the Local Government Association (no hotbed of radical left thinking, dominated as it is by Home Counties Tories and Blairites) estimate a current shortfall of £13 billion to provide current and short term projected increases in adult social care demand. Demand which of course is highest in the poorest areas where health inequalities are so much more acute.
I remember about ten years ago George Osborne announcing his latest wheeze that local government should ultimately be fully funded by Council Tax. He quietly shelved that idea once it became apparent how much of a disaster it would be but he still oversaw a cut in local authority funding of over 30% (and by conincidence my salary point now pays some 30% less than it would if it had simply been increased to match CPI inflation every year since 2010 i.e no actual pay rise at all). Which brings us to the MMT lens which tells us that local government, as a currency user, can only spend what it can raise from taxes, fees and other charges or receive from government grants. And the other side of the coin – ultimately the vast majority of local government spending (and a substantial chunk is wages) is returned to central government as tax and removed from circulation. By cutting the formula grant and other local government support the state is effectively sucking money out of local areas and not replacing it with the worst effects being felt in the most deprived areas. If central government places a duty on local government to do something then central government as currency issuer should fund this, not pass the burden to already stretched local tax payers.
Thank you.
Much appreciated.
As others may know by now, I work in social housing as my LA of a large Midlands town therefore has a Housing Revenue Account (HRA) for its social housing.
Many LAs who sold off their affordable stock under Large Scale Voluntary Transfers (LSVT) will be in big trouble at the moment without a HRA. Talk about stupidity and bad decision making and short-termism.
The HRA could prop up the general fund (although it’s not strictly allowed to) by transferring certain housing related services into the HRA to be funded by it. That is what my LA has done. But the HRA is now under pressure and the reserves are dwindling. So even the strategic use of the the HRA will be reduced in the future years if central government support grants are not restored.
I can also see a requirement for HRA’s everywhere to be topped by central government in the future as well as they have also had to absorb the cost of Covid (and BREXIT) and rent rises that were supposed to recover those costs were quashed by the Treasury last year.
We can boost the HRA by self funding what new affordable housing we can build or purchase and also generate income from interest as part of good HRA business planning (this also makes up lost income from another stupid policy – Right to Buy). So we are reinvesting the HRA surplus and also taking Social Housing Grant from the government. But around 2050-55 our HRA will be maxed out.
Currently my LA has 8000 people on the waiting list. If we build all the homes we can, I think that we are only catering for only half of that.
And then we look at a certain Ms Reeves talking about not having the money to put all of this right, nor claiming any of the huge gains the rich have made at the same time in order to help out maybe?
All I can say to her is that it is all very simple Rachel. All you have to do is put the government’s money that was taken out back in. Collect the taxes from the rich which was wrongly allocated to them in the first place. Redistribute downwards if you have to but for God’s sake put the money back in!!!!
A lot of people tell me that Reeves is very clever. But does she grasp this? It’s simple cause and affect.
The biggest problem for local government is that ever since the 1980s when Thatcher legislated to remove their ability to raise rates in line with the budgets needed to fulfill their responsibilities according to the wishes of local voters, councils have simply become underfunded dustbins for the ignorance and bad ideas of UK central governments.
They are now just part of the ever increasing UK Democratic deficit.
Paul
As much as I agree that the ghost of Nicholas Ridley still dominates Council funding matters, it is – as always – a lot more complicated than that. If you would indulge me somewhat………….
LSVT (Large Scale Voluntary Transfer)
As mentioned above, Councils were encouraged to divest themselves of their social housing and transfer it out of the public domain into the private one. Many right-wing councils loved this, and went for it. The receipt for the housing did not have to be used for housing either – it could be used for ‘other projects’. My local district council sold their social housing and used the money to build a brand new………………………. sports centre. This is the same council that bemoans the lack of government grant for new affordable housing these days for the children of local lowly paid rural workers, and is allowing instead the development of private housing seemingly everywhere to well off newcomers from the South.
Part of this was how the post war housing that had been developed as social housing in some areas was treated as ‘over-hanging housing debt’ for each local authority yet it was based on national policy. Making council’s build affordable housing and then leaving them to service debt was a big policy mistake ripe for abuse in my view and it has been. Calling it debt made it look bad and a huge shadow was cast over it and what was a blessing became a curse.
LSVT also means that the Council loses an HRA – a local resource of income.
1989 Local Government & Housing Act
There was also legislation to stop Councils from managing their budgets locally as they saw fit in the 1989 Local Government & Housing Act which prevented Councils moving around money between the general fund and housing revenue account. There are some attractive reasons for doing this, but also many bad ones as it is dictating to councils from central government. To say that housing has no relationship to the general fund is simply not true. When I build new homes on unused car parks and vacant council land, I’m saving the general fund money; new tenants pay council tax adding to income. General fund funded services help make households and houses viable. It was typically Tory Neo-liberal bullshit. All this Act did was to take away local free control of local income and lessen the options for councils on yearly budgets in the context of lower support grants to councils from government. Budgeting is hard work. Having less to work with is even harder.
Council Tax
Today I see council tax as a disaster on par with BREXIT because of the collateral damage it has caused local services and the commonweal. Council tax has become a political football that promises local people’s priorities but does not deliver because the tax has been used by local politicians to get into power. Their quest for power (on the basis of less CT) results in less money for services than more in my experience – services and the commonweal are sacrificed for gaining political power. It is as cunning as it useless. It ties tax payers and councillors in knots and results in policy and action stasis – the same sort of stasis that we see emanating about tax at a national level. And it needs to be sorted out. Bring back rates – even if in name only.
Government Grant Funding – Stop and Go Funding with Menaces
Now instead of issuing support grants for statutory services, central government expects a beauty contest – at the council’s expense of course in man hours and time – to compete with other councils for ‘best value’ for the grant.
So, we recently had the de-carbonisation fund go out to councils that – after all that work – they found to be over subscribed. So what did the government do? They revised DOWN the grant that we would all be getting, placing more onus on the local HRA to make up the cost. With a huge reduction in the grant we thought we’d be getting, we just could not afford do it or it will take longer to de-carbonise.
And if you want to know more about the modern snake and ladder system of central government funding, look no further than Social Housing Grant (SHG). Again, you have to bid for SHG and administrate it in your own time and cost and it is audited – and the LA has to pay for the audit to prove to the funder that you have spent it as intended!!
If your new homes get SHG, you have to (1) convert some of your existing social rent (lower rent) to higher 80% market rents (prospective working poor people in my town are now turning the 80% market rent properties down even now as too expensive for them to rent) ; make them eligible for Right to Buy (so that you lose them) and also have to make some new homes available for sale or shared ownership (one of the most expensive ways to own a house BTW). SHG is used as leverage to continue to eat away at public provision in favour of the market. Fact. How twisted is that?
The HRA is now solely owned by the Local Authority (but not really).
In the old days, HRA surpluses were rounded up and much of it sent back to central government to reallocate to other councils with particularly acute demand problems ( so London councils used to get the bulk of it). This was stopped under the Localism Act (it followed on but remember Cameron’s baby policy?) and Councils can keep and manage their HRAs and bear sole responsibility for the viability of the HRA – there is no government bail out like what the private banks got in 2008 if things go wrong.
However, the HM Treasury still calls the shots on the annual rent rise for council secure tenancies – the main source of income remember for the HRA. Last year we needed 10-11% to cover Covid and inflation and we did not get it. We I think got just over half and that was hard fought for. Result – hard decisions about what we can and cannot do resulting in local impacts.
Also, if the Treasury reckons our internal rate of return on the HRA loans for new build is too low it makes us (yes – it makes us) increase it by their suggested amount. They did this to us in 2019 and immediately a whole year’s worth of budgeting and business planning was rendered useless just out of the blue.
So Paul, it’s not just about the money (but it is!!). It’s also about the pettiness and contradictive way in which central government in this faux democracy of ours actually imposes itself on local people and councillors in this country.
To me, this disruption and coercive behaviour is thoroughly class based and it is deliberate.
Local services are just a rich man’s burden. Government is there to serve the rich and push expenditure back onto local people enabling the state to only serve the needs of the rich.
The money of the rich isolates them from reality. They simply don’t want to know or care. To need something off someone else is a weakness and intolerable to them in their world. To WANT something however (your house, your land, your wealth) is the only valid reason to exist. They want less for us who can only be no good because we are not rich like them. And they want more for themselves as they think they are worth it.
Sure – they’ll use us to get what they want – but when they’re done we might as well not exist. We’re just slaves to them, to be used and thrown away and those in our government and civil service are willing enablers for the right price and the odd knighthood.
Anyhow, I read this today in the Guardian- talk about the negation of democracy:
https://www.theguardian.com/us-news/2023/aug/26/black-mayor-alabama-town-locked-out
Read it. And take in the intransigence of the protagonists at work here. And maybe its similar to the same intransigence we are dealing with in the West amongst the vested interests of the rich whom we’ve allowed to become too rich this last 40 plus years at our own loss.
I’ll sign off with this: if we don’t sort this out, in the future whether you are white, black, yellow, straight, gay, this or that – unless you are rich we and your children will all be slaves and treated no better than Patrick Braxton above. Treated as if you do not exist.
That to me is where we are going.
Thanks
Very fine post PSR – nails it. Neither the tories nor Liebore want local democracy or self-funding local gov – they want serfdom, moving the clock back to circa 1820, no-man, no-vote.
No doubt if the BakerStHerald still had his Twitter account (it’s suspended) he’d be warning us this is all part of a deliberate plan to do away with local representation and democracy and hand entire regions over to corporate control. He could be right too.
European Powell has taken up BakerStreetHerald’s flag on X. The government can appoint gauleiters to run councils, and the line of thought from that revolves around Sunak & co’s well-established connections to the Charter City/freeport movement. When you see just how Lord Houchen and his pals have lined up Teesside as a wealth extraction exercise (Private Eye every edition), and how Labour has not opposed this (despite Andy McDonald’s efforts), you begin to wonder how far this could run. What seemed paranoid three or four years ago…….
It’s fine getting it written about in the Guardian and discussing it here, I suppose, but it might help a bit more to write regularly in these terms to the other newspapers.
When the Guardian had a chance to make a difference, it joined in with the attacks on Mr Corbyn (and Mr Assange, for that matter) and toed the “centrist” battle-line. Articles like the one cited above are safely targeted at the US, which we can (until we reach the foreign policy area) criticise. Gives us a nice sense of righteous (but ineffectual) outrage. The dire situation here is just as much down to the Guardian (and BBC and other so-called impartial and principled sources) as anyone else. The Guardian is as phony as “New” Labour.
My oldest son and I are on a short break in Bruges at the moment
It’s fascinating going round the City Hall
Lots about the history of the city but two world wars, the Napoleonic Wars and the formation of Belgium don’t get a mention
An interesting insight into the City’s power
Nothing like the UK