Last Word: Crisis in Local Government
| Published date | 01 June 2024 |
| DOI | http://doi.org/10.1177/20419058241260790 |
| Author | Phil Swann |
| Date | 01 June 2024 |
36 POLITICAL INSIGHT • JUNE 2024
Last Word
In March 2021, an ocial at Warrington
Borough Council, in the north of England,
was presented with a pitch from a nancier
to invest in a commercial building in
Birmingham, 75 miles away. Warrington
invested £10million. Its stake is now worth only
£1.3m. This was one of numerous controversial
investments by the council as part of its
response to the nancial pressures it faces.
Warrington is just one example of the
nancial crisis facing local government in
England. Across the country, councils are facing
huge shortfalls – or even bankruptcy. Solutions
to the crisis, however, would require a level of
political commitment to local government that
has long been missing from Westminster.
Take the case of Birmingham City Council.
It issued a ‘section 114 notice’ in September
2023. This is a formal notication that a council’s
expenditure is set to exceed its income,
requiring the council’s political leaders to work
with central government to agree action to
cut spending. In Birmingham’s case this has led
to plans to sell £750m assets, cut spending by
£300m and increase council tax by 21 per cent
over two years.
Birmingham is not alone. Fourteen councils
have issued s114 notices since the relevant
legislation was introduced in 1988, but most
of them have been issued since 2020, with
Croydon issuing three notices and Nottingham
two. The Local Government Chronicle
calculates that 74 councils, more than a fth
of all English councils, are currently subject
to statutory government interventions,
exceptional nancial support, or Department
for Education intervention. It is convinced that
many more s114 notices will be served.
Local factors are often involved, but the
wider context is critically important. According
to the LGA, councils’ core spending power has
been cut by 23.3 per cent since 2010/11, yet
cost and demand pressures have added £15bn
(28.6 per cent) to the cost of delivering services
since 2021/22. In addition, councils’ ability
to raise more resources themselves through
council tax is tightly constrained by central
government.
The claim that local government faces a
nancial crisis is undoubtedly justied, but it
is far from being an unusual position for the
sector to be in. It was in 1872 that George
Goschen, widely regarded as Queen Victoria’s
favourite minister, rst referred to ‘a chaos as
regards rates’. Just over 80 years later Harold
Macmillan, then minister for housing and local
government, warned his Cabinet colleagues
that action must be taken to ‘strengthen local
nance’.
Goschen and Macmillan are prominent
members of a long list of ministers who failed
to put local government on a secure and
sustainable nancial footing. The question
now is whether ministers in a future Labour
government will be any more successful, and
the omens are not looking good.
Labour’s Plan to Power Up Britain, published
in March 2024, commits a future Labour
government to introducing longer term
funding settlements and abolishing multiple
competitive funding pots. So local councils
will have longer notice of how little resources
they have and may not have to waste money
on bids. At least the party is not raising
expectations. In 1997 Labour’s manifesto
contained a commitment to abolish universal
council tax capping. That commitment was
never implemented, the capping powers
remained in place and are contributing to the
current crisis.
Why have successive governments failed to
tackle the continuing crisis of local government
nance and why it is dicult to be optimistic
that a future Labour government will do so?
Crisis in Local
Government
Phil Swann examines the problems in English councils – and finds
few easy solutions.
Looking back over the last 150 years it is
possible to identify four signicant obstacles
to reform.
First, the power of vested interests.
Goschen’s reforms were dropped in face of
demonstrations by the liquor and carriage
trades which caused MPs to ‘tremble for their
seats’. The discussion on business rates in
Labour’s latest policy statement refers to their
impact on the retail industry, with no reference
to local councils.
Second, the attraction for ministers of
measures such as council tax capping. The Blair
government did not abolish capping because
it did not trust councils to deploy new nancial
freedoms wisely.
Third, the refusal of successive governments
to devote parliamentary time or political
capital to a potentially politically damaging
topic. The poll tax contributed to Margaret
Thatcher’s downfall, and a failed attempt
to reform local government nance also
contributed to the resignation as chancellor
of the exchequer of Winston Churchill’s father,
Lord Randolf Churchill.
The nal factor, innate caution, is probably
the most signicant. Labour’s Plan to Power
Up Britain, is spectacularly unambitious with,
for example, no discussion of any new ways
of raising resources locally. In this respect the
document has a ne pedigree.
Goschen, in his roles as President of
the Board of Trade and Chancellor of the
Exchequer, staked his career on changing
the system by which central government
funded local councils, but he rejected more
radical options out of hand. He dismissed
local income tax, for example, as ‘the dream of
reformers of local taxation’.
Macmillian was even more dismissive. In a
formal Cabinet paper, he rejected the idea of
a royal commission on local nance on the
grounds that it would provide ‘the opportunity
for the long-haired, starry-eyed boys. We shall
have all sorts of crazy and dangerous ideas –
the local income tax adherents; the tax on land
value enthusiasts and all the rest.’
Sadly, Labour’s current leaders appear to
have reached the same conclusion.
Phil Swann is studying for a PhD on the
contribution of politicians to central-
local government relations at INLOGOV
(University of Birmingham).
Political Insight June 2024 BU.indd 36Political Insight June 2024 BU.indd 36 23/05/2024 15:2923/05/2024 15:29
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