This year, for the second time in two years, Sheffield Council will not turn on the city’s Christmas lights. The local authority is currently projecting a £34.3m overspend and as a result has had to find costs to balance the books. In Birmingham, where just over a year ago the city council declared itself effectively bankrupt, the streetlights will be dimmed to save money. This is part of a £300m programme of savings which the council must make in order to keep running.
For Birmingham’s residents, this means cuts to adult social care services, children’s services, flood defences, and highway maintenance, and a 10 per cent rise in council tax. The council has said its cuts programme could see the loss of up to 600 jobs, the scrapping of arts grants, library closures and a reduction in bin collections.
Birmingham’s predicament – though extreme – is not unique. Councils across England are currently being forced into making difficult decisions on the levels of service they can provide to their residents simply to deliver a balanced budget. (Councils are legally required to balance their spending each year and are not allowed to carry over disparities into the next financial cycle.) A report by the Local Government Information Unit in February found that nearly one in ten councils were warning they could go bankrupt within the next twelve months.
The timing of this crisis is inauspicious. Ahead of the Budget the government has been keen to remind everyone of the £22bn black hole in public finances. With rumours of departmental budget cuts swirling, it is unlikely the government will dig deep to prevent more councils from going bust.
Still, this crisis is years in the making. According to the National Audit Office, local authorities’ total spending power fell by 26 per cent in the decade between 2010-11 and 2020-21. But this has not been accompanied by a drop in demand for services. It is unsurprising that an increasing number of councils are finding themselves on a knife edge, with no option but to appeal to central government for extra help.
But offering councils sticking plaster assistance is proving expensive. Nineteen councils are currently receiving exceptional financial support from government this year at an overall cost of £1.4bn. Birmingham alone has received £635m from government this year, with two additional councils – Windsor and Maidenhead council and Newham council – putting in requests over the past few weeks. New research from the Local Government Association published this week has revealed that one in four councils are likely to need to put in similar requests for support over the next two financial years to prevent collapse. But these are mere palliatives.
Before entering government, Labour pledged to alleviate councils’ financial predicament by offering them multi-year funding certainty. Currently, local authorities are only given funding in one-year cycles making it near-impossible to plan for the future. A Treasury insider told the New Statesman that councils will not receive multi-year funding this year as it was deemed too complicated to change gear so shortly after an election. Addressing delegates at the LGA’s annual conference on 24 October, the local government secretary, Angela Rayner, acknowledged the precarious situation councils find themselves in, and she reiterated the government’s commitment to eventually providing a multi-year settlement.
Without councils on their feet the government will struggle to deliver the feted “missions” that have come to define Keir Starmer’s political operation. Take the government’s mission to cut NHS waiting times. Preventative care and public health schemes – such as mental health care, drug and alcohol services, and sexual health clinics – can help patients to present earlier and stop them from needing acute care. But many of these services are run by councils, and therefore vulnerable to cuts. The same too can be said of the mission to crack down on anti-social behaviour. Councils have a range of powers to tackle incidents involving vandalism, intimidation, and noise or pollution. But while so chronically under-resourced, they cannot help Whitehall fulfil its broader ambitions in this policy area.
We don’t know the exact details of Reeves’ plans for local government funding yet. But a wave of council bankruptcies is on its way. And this isn’t just devastating for local communities. Councils are a constituent part of good government writ large: Labour depends on them to run Britain well.
[See also: The man who fixes broken councils]
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