Nightmare looms for troubled town halls

Local councils in England, which consume a quarter of public spending, have seen government funding cut by almost 50 per cent in seven years, according to the National Audit Office (NAO). One authority – Tory-run Northamptonshire – has run out of cash. Six others, mainly county councils, are at risk of going under.

Quantifying the unprecedented government onslaught on the local state, the NAO – the government spending watchdog – warned recently that many English councils are becoming barely sustainable. With reserves used to balance the books fast depleting, the NAO questioned whether the Whitehall department ostensibly meant to oversee councils – the Ministry of Housing, Communities and Local Government – understood the real impact of cuts on local authorities’ operations.

Worse still, the government can’t say how English councils will be funded after 2020 because afinance bill, meant to reform local taxation, fell before last year’s general election. It has not been resurrected.

The idea, from the former Chancellor George Osborne, was to cut a vital Whitehall grant to councils and instead hand them control of business rates – currently collected locally and redistributed nationally – by 2020. He portrayed this as the ultimate devolution settlement. This move was naturally warmly welcomed by the richest councils, such as Westminster, with a high tax base partly delivered by the wealth of Oxford Street. It could be eminently self-sufficient. Bad luck for scores of poorer councils – Stoke, Blackpool, Sunderland for instance – with low tax bases who could never be.

‘The government has argued it is forcing councils to be more independent and autonomous – a very perverse view of freedom if you are relying on your own resources,’ says Graham Chapman, deputy leader of Nottingham City Council and a finance expert. ‘We are moving back to the days of the ‘poor laws’ – the poorer you are the less you get.’ This year Nottingham is being forced to trim £27m from its budget, marking the biggest single cutback in seven years.

Almost everyone, apart from the hard ideological Right, accepts that a variation of the current redistribution formula, balancing local needs with resources and compensating councils for a shortfall, will have to be applied to any new system. But the government is unable to say what it might be. Belatedly late last year it launched a ‘fair funding review’, but it can’t say when that will be completed.

A nightmare scenario, dismissed as scaremongering by senior ministers until recently – literally, the collapse of local government as we know it – is unfolding before the eyes of a UK government still in denial about the consequences of town and county halls becoming technically insolvent. Unlike Whitehall departments and government agencies, they have a legal duty to balance their books.

‘While we think half a dozen are in a very, very dire financial state, possibly another 100 or so are worried about delivering services this year,’ warns Jonathan Carr-West, chief executive of the LGIU, the leading local government think tank, which regularly surveys council finances. ‘It it extraordinary that this has not become more of a national scandal.’

The consequences of austerity lie before our eyes: pot-holed country roads (and some urban ones) barely usable; bin collections reduced; libraries, swimming pools, leisure centres, childrens’ centres shuttered; parks seemingly abandoned; bus services slashed. These are classed as ‘non-statutory services’. All resources are now poured into ‘social care’ – adult and children’s services – with this sector now accounting for well over half of council spending. By 2020, the Local Government Association, which represents 350 councils, calculates a funding gap of £5 billions – yet it is far from clear how English local government will be financed by then.

Osborne saw local government as a seemingly easy target, ably supported by a bullish Sir Eric Pickles, a former Communities and Local Government Secretary, who happily volunteered council cuts and complained – to the horror of the professional organisation representing senior council finance officers – that authorities could easily dip into their multi-billion pound reserves to make ends. The result? There’s precious little left to dip into. According to the NAO, some of the largest councils, on present trends, will have no cash reserves in under three years.

Liverpool has probably been hit harder than any other authority and its elected mayor, Joe Anderson, says even if the city council closed all 19 libraries, and nine sports centres, stopped maintaining its 140 parks, abandoned road maintenance and street cleaning, switched off 50,000 street lights, it would save only £68m – £22m short of what the city must cut by 2020.

Mainland Europe, where a variety of local revenues underpin local councils beyond the familiar property taxes – a few Euros often imposed on hotel guests, for instance, alongside payroll and sales taxes – will doubtless look on in disbelief at the shrinking of the English state. Some countries have written constitutions legally codifying council powers.

But not, of course, unitary England, where councils raise only a tiny proportion of overall taxation compared with European neighbours. On May 3, elections will be held in 150 councils areas – including 32 London boroughs – with over 4,000 seats being contested. In addition, five directly-elected mayoral contests will be held as well as another for a new Sheffield City Region mayor.

The future – the very survival – of local government should be high on the agenda. It won’t be. Few participants, least of all Labour, want to create any hostages to fortune with detailed promises to reinvigorate town and county halls and, crucially, develop new funding streams for beleaguered councils. That would,apparently, be asking too much.