UK councils are going bust

As the crow flies, London is about 100 km away to the southeast, and Birmingham about 70 km away to the northwest, putting Northampton pretty much in the centre of England. And right now, the city of 215,000 and surrounding county that’s home to another 500,000 more, is pretty much at the centre of a funding crisis — one that is playing out across England and Wales, and is having a very dramatic and immediate effect on people’s lives, much more so than the political shenanigans under way at Westminster, and the UK’s place in Europe.

Northampton council is broke. Last February, it effectively went bankrupt.

No, it’s not a story of gross misspending of resources or a waste of money — like at least 35 other local government councils up and down the UK, it simply can’t raise enough funds to keep its services going, receives too little from the Westminster government in London, and can’t continue to provide the level of services required by law — looking after the elderly, fixing roads, contributing to policing, maintaining infrastructure, collecting rubbish, caring for children in crisis, keeping street lights turned on and books in libraries.

Across the UK, funding for local governments has fallen by at least 60 per cent since 2010, and by the time 2020 rolls around, there will be a staggering £21 billion (Dh96.7 billion) shortfall in funding for councils. Councils are the lowest levels of government, and can levy a tax on homes and charge fees for some services as well as collecting a nationally set tax on commercial properties and keeping a share of it. But for years, they depended on funds from Westminster — and since 2010, under the Conservative government’s policy of austerity, the councils’ funding has largely dried up.

Northamptonshire council just about has enough money to pay for basic mandatory services — everything else has stopped — and two outside commissioners have been appointed from London to oversee its activities and finances.

“I was a believer that we had to save money, but there had to be other ways than to slash and burn,” explains John Ekins, a Conservative councilor in Northamptonshire. “How did we get to where we are? What the hell has been going on?”

Slow effect

His frustration echoes across the country. One in 10 of the larger councils that have obligations to care for children and elderly people — about 35 councils in all — are in danger of exhausting their reserves within the next three years, according to the National Audit Office.

“There’s a slow-moving domino effect,” said Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy.

Northamptonshire was the first flashing red light. East Sussex County Council, run by Conservatives, recently announced it would reduce services to the “legal minimum.” The Conservative-led county council in Somerset warned it might be facing bankruptcy too.

“UK local authorities are heavily reliant on central government grants — the Revenue Support Grant — which has historically accounted for 70-75 per cent of the income of local authorities,” explains Dr Philip Catney, a senior lecturer in politics at Keele University and a specialist on local government. That has been nearly halved between 2010 and 2018.

“At the same time, local authorities are finding that social care and other statutory duties costs are increasing without a sufficient match in the funding from central or local sources to match the need,” he tells the Weekend Review. “Such a dramatic deterioration in the financial position of local authorities with increased demand on services was always going to end up problematic. Local authorities have cut back significantly on the services they offer and have made numerous efficiency savings but there are not many more savings which can be made now.”

Obviously, raising the revenue support grant would be a start but also increases in the scope for local taxation rises would be helpful, Catney says, though such a move would almost certainly be unpopular with local people.

Broke

Northamptonshire council went so far as to sell the building it’s based in, then lease it back. Even then it couldn’t find enough money to stave off the inevitable. A few km from that building is a small farm where vulnerable adults and those with special needs spend their time tending to plants and growing vegetables. Their needs are so severe that they receive a care package paid for by the local council, part of the services it is mandated to provide under local government and social care legislation. For many, the farm is their only social interaction, and without the funds, they would be closeted in their homes.

Christian Robertson is 54, lives in sheltered accommodation, and without the funding from the council, would not be able to afford day care.

“I’ve got some good friends, we have a good laugh, he told Sky News as the council’s financial plight became national news. Gregg Cave, who runs the project, says those who come don’t understand the impact the council cuts will have on their lives.

“It’s such a big thing that’s going on at the moment that if they realised the full implications of what was going to happen, what could happen, then it is massively life changing, so quite devastating to some of the guys,” Cave said.

So what is the solution to this chronic underfunding of local government services? More taxation ability on be behalf of councils?

“The government is planning to localise business tax rates by 2020,” Catney says. “This, however, will potentially create more inequality between areas.”

Right now, councils are generally limited to raising local taxes by a cap of 5.99 per cent. Would raising that limit help?

“The 2011 Localism Act allowed local authorities to go above the cap set by Westminster but with the requirement that a local referendum would be required to authorise this,” Catney says. “This was essentially a mechanism to give the appearance of local control but with the reality that local authorities have had to back away from rises above the cap because few people are willing to pay higher taxes for local government.”

Surrey, a well-to-do county just to the south of London where many Conservative ministers reside, recently mooted holding a referendum to increase its local taxes by 15 per cent. That proposal was quietly dropped, much to the relief of those ministers.

But why is the system so broken and for so long?

“Local finance has been a thorny issue for decades and failed attempts to reform the system like the Community Charge — also known as the Poll Tax — has made a fundamental rethink of the system a difficult one,” Catney explains, adding that there have been recommendations for change but the implementation of those has been patchy.

“Other local authorities like Somerset County Council, Barnet and Birmingham City Council have featured in the news for their precarious financial positions,” Catney says. “Each one is in a difficult position for individual reasons but the broader financial position of local government has certainly made these acute cases.

“Local authorities have long been at the sharp edge of financial politics in the UK. National government often espouses localism but fails to make it a reality in practice, unless it is a lightning rod for unpopular changes,” he says.

–With inputs from agencies

Mick O’Reilly is the Gulf News Foreign Correspondent based in Europe.