Austerity is well and truly bust but councils have already paid the price

The political trick was to make councils bear the brunt of the austerity programme, and to also bear the brunt of the political backlash. But there's only so far you can go before things start to collapse

Friday 10 August 2018 11:13
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Northamptonshire Council Council is the first local authority to declare itself at risk of spending more money than it currently has available
Northamptonshire Council Council is the first local authority to declare itself at risk of spending more money than it currently has available

It is a hardly a signal honour for Middle England: Northamptonshire now joins New York City, Zaire, Venezuela and the London borough of Hackney in the list of nations and municipalities that have, in effect, gone bust.

At least the government has not had the cheek to blame Labour for this particular mess – the council is Conservative run, as it has been since 2005. No doubt there may be some special factors at work, but the fact that it comes as no great surprise that a British local authority can no longer provide basic services tells us much about the state of local government finance, and central government’s callous and negligent attitude towards it.

The broad brush picture of local government since the arrival of the Conservative-led coalition in May 2010 is simple. George Osborne’s Treasury reduced financing for local authorities at just the time that a combination of recession and demographic factors were increasing demands on town halls, most notably in social care. Council tax rises were capped or politically difficult to push through, and services inevitably suffered. Debts have piled up. Northamptonshire is merely the most obvious example.

The political trick was to make councils bear the brunt of the austerity programme, and to also bear the brunt of the political backlash. In that sense it worked, with the Conservatives gaining an unexpected overall majority in 2015, since squandered by Theresa May in her snap election gamble. Throughout, however, austerity has been applied, with varying degrees of intensity, and the local government suffered arbitrary cuts in funding and services. Because most of the money that councils spend comes from HM Treasury, council tax has to be raised by disproportionate amounts in order to make up any gaps. Understandably, hard-pressed families resented both the cuts and the above-inflation hikes in council tax bills.

Northamptonshire will not be the last local authority to go under. The County Council Network, for example, says that as many as 36 local authorities face financial pressures amounting to some £3.2bn.

The short term answer pursued by the Ministry of Housing, Communities and Local Government, as with Northamptonshire, is to have Whitehall civil servants conduct an inquiry while commissioners are appointed to run services. Democratic oversight remains, because councillors remain in place, but democratic control is in effect suspended for the duration. It is no way to run a county.

Given the comparatively modest sums in the global total of public spending, there is a strong case for simply accepting reality and the fact that the squeeze on local authorities has simply gone too far. Brexit threatens to make matters worse, and the governance of Britain will be difficult enough without local authorities collapsing all over the country. Any sane government with an eye on political reality will not want to see the schools closed, housing departments shut down and bins uncollected for months while the “exciting opportunities” of Brexit are supposed to be opening up for global Britain. Electorates tend not to reward governments that make them live under “winter of discontent” conditions. The last time it happened, 40 years ago, it was the fault of the unions and a Labour government; now it will be purely the Conservative administration of Ms May that will suffer the humiliation, one that will be richly deserved.

That, though, is hardly enough. The truth about local government finance is that it has never worked particularly well. The old rates system was archaic and almost random in the taxation it levied on properties. The shortlived community charge, better remembered as the poll tax, replaced it in 1988 with even more vicious anomalies and rampant unfairness. After riots and the loss of a prime minister, Margaret Thatcher, the Conservatives botched together the council tax, a composite of compromises that has been with us since Norman Lamont was chancellor of the exchequer. Given the hazardous history, no minister since has dared to touch it; David Miliband, the last one to even discuss the possibility of re-rating homes, openly declared that it was political suicide to go near it and so left it alone.

The consequence is a patchwork of areas that are favoured or disfavoured by this odd system of local taxation, often resented even though the council tax only funds a minority of local activities, the rest being supplied by a complex system of Treasury block grants. These peculiar features mean constant financial pressure and insufficient local accountability. The people of Northamptonshire are merely the latest losers in this game of chance. There will be more. With Brexit looming too, no wonder councils are making contingency plans for civil disturbances.

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