Comment | 'Cash crisis at councils is now a pressing issue'
By Phil Catney, Senior Lecturer in Politics at Keele University. This article first appeared as a Personally Speaking column in the Stoke Sentinel in January 2024.
It is hard to understate the crisis in local authorities. What was a long-standing concern about the health of council budgets has turned into a major political crisis. This winter of discontent in local government has seen several essentially declare themselves bankrupt, or, like Stoke-on-Trent City Council, have warned that it might be coming. To head off a Section 114 declaration, local authorities have had to make numerous painful cuts to local authority services. Newspapers provide ample evidence of such decisions, and their effects, including limited investigation on mouldy rental properties, failing child protection services, and even cutting vacant lollipop patrol posts. The imposition of charges or increases for collecting garden waste has proven to be a particular focus of public ire. Local authorities are also now pressing for above-inflation increases in council tax. The public is understandably confused about why the charges for local services keep rising while services are increasingly being cut.
Failure to avert a Section 114 declaration could see the governance and finance decision-making powers being stripped from a council and transferred to central government-appointed 'commissioners'. In addition, it could see the progressive selling-off of local authority assets to achieve some level of solvency. This is what Birmingham City Council and other councils who have significant debts are consigned to.
To forestall such a move, local authorities have been lobbying for increased one-off payments from local government, or, in the case of Stoke-on-Trent City Council, a two-year loan to enable changes to how services are delivered to make savings. The scale of local government indebtedness has become something that Parliament has recognised. The Public Accounts Committee, a cross-party parliamentary committee focused on value for money in government, recently noted that residents in local authorities face an "extreme and long-lasting" impact on public services. There is good reason for such pessimism: Data from the Department for Levelling Up shows that UK councils collectively owe £97.8bn to lenders (as of September 2023). The debt figure rises to £122bn if police and crime commissioners and combined authorities are added.
Two obvious questions arise from such alarming figures: how did this happen and what can be done about it? The question of how this happened is a mixture of changes in how central government has sought to shift the burden for revenue raising from the national exchequer to local areas, allowing extensive public borrowing with weak oversight, recent inflationary pressures, and the rise in social problems requiring local action. Stoke-on-Trent City Council's recent budget consultation outlines the pressure on local services, such as the surge in the number of children in care in the city. The reduction in national funding comes at the same time that local sources of investment are failing to generate the money anticipated to pay for them. And the city’s weak tax base has further eroded the council’s position.
In terms of what is to be done, there are short-term and longer-term moves. In the short term, Stoke-on-Trent City Council's proposed 4.99 per cent rise in council tax is unwelcome to many but should not be unexpected. Indeed, some parts of the country have asked central government for permission to raise council taxes by as much as 10 per cent. We are yet to see if the city council's request for a loan of £44.7m over two years to restructure children’s services has been accepted, but many other local authorities have been forced to ask for support from the Department of Levelling Up to prevent insolvency. While the Department of Levelling Up announced in December a £64bn 'support package' for local government, which equates to an average 6.5% increase in local government core spending power in December, it failed to note that around half of the increase comes from assumed council tax rises of up to 5%.
Various groups representing local government have already noted that these increases are insufficient. The longer-term question is what can be done to prop up local services and then what is to be done with this debt. Whichever party takes control in Westminster in the anticipated election later this year, the problem of local government finance will be pressing.
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