East Anglian councils have been losing money, but most people have not noticed because local government is the least glamorous part of our government. It is generally ignored by the national media, and turnout in local elections is always much lower than in national ones. However, it is the part of government which has the most day-to-day impact on all our lives. Local authorities provide housing, social care, schools, waste collection, libraries and leisure services. They maintain and clean the streets, and ensure that shops and hospitality venues are safe. They also provide dull but important services like business support, registrar services and pest control.
Some of these are ‘statutory services’, which they are obliged to provide. Of these, social care is by far the largest. Other services are ‘discretionary’, and can be cut or abandoned if money is tight. In the last decade, most authorities have had to cut discretionary services in order to maintain their statutory duties, and Birmingham and Thurrock are among a growing trickle of authorities that have become, or are near to being, insolvent.
Squeezing councils
Local government in England is funded by a combination of local council tax, local business rates, and central government grants. Of course, some authorities are much more able to raise money by the first two, and historically the central government grant was designed to ‘level up’, compensating poorer areas for the fact that they are less able to raise money at local level. Unlike central government, local authorities cannot borrow money to provide services or invest in housing or infrastructure, though they can, and many have, borrowed to invest in commercial property.
Two pressures have affected local government in the last decade. The first is ‘austerity’: the attempt of the coalition government of 2010 and its successors to reduce overall government spending. Because local government rarely features in the national media, when savings are needed it is easier for national government to cut grants to local government than to cut more immediately visible national services. So that’s what they did.
This means that voters blame the local council, not national government, when things go wrong, or services simply prove inadequate. Government’s suggestion that councils should seek alternative funding sources led some to engage in risky commercial investments. In Thurrock bad investments resulted in the council issuing a ‘Section 114’ notice, which declares that it is not able to meet its financial commitments, and prevents it from making any spending beyond its statutory duties. To save money, in 2015 the government also abolished the Audit Commission, which had previously audited all local authority accounts. Private firms have not been able to keep up with the workload, leaving a big backlog of unaudited authorities.
The second pressure is the long-standing distrust of local government by central governments of all parties. Central government fears lack of control, and it often wants to use local government to implement national policies. They are always reluctant to let local authorities have too much power, and over decades, power has steadily moved to the centre. The result is a growth of competitive funding, where central government decides on a policy, which may or may not match local needs, and invites local authorities to bid for the money. In practice, this has meant that some local authorities have spent a lot of time and money preparing bids which proved unsuccessful.
Not all are equal
There are 675 local authorities in England, including county councils, unitary authorities, district and metropolitan districts. Between 2011 and 2021 all saw their spending power reduced.
All lost, but some much more than others. Twenty-one saw their spending power more than halved over the decade. In some places, the changes failed to reflect rapid growth in population, meaning that those authorities lacked the money to respond to the needs of that new population.
In East Anglia we have lost more money than most
Overall, local authority resources shrank by 31%, but East Anglian councils lost more money than most. Although none of our county councils lost more than 26%, only 6 of the districts did better than the national average for all councils.
The worst affected districts were Great Yarmouth and Norwich, which both lost more than 50%, followed closely by East Cambridgeshire and Fenland. At the other end of the scale, Chelmsford and Uttlesford lost ‘only’ 22% and 23%.
What is the future?
It is clear that the present situation is unsustainable. Birmingham is only the latest authority to issue a ‘Section 114’ notice. Although this is not technically bankruptcy, it can no longer make any new funding commitments and is likely to have to raise council tax and restrict its services to the statutory minimum. Where possible social care, which is by far the largest element, will be reduced to the minimum, and many services valued by citizens will close down.
People will be paying much more for poorer services. Many people will blame the council, whether or not that is deserved. Cuts to staff will harm the ability of the council to carry out its duties efficiently and in a way which residents might want.
So when the potholes are not repaired, the library or swimming pools close, the planning application is endlessly delayed, the restaurants are not checked for safety, or the phone is not answered, it is rarely because local councillors or their officers want these things to happen, nor because they are incompetent or corrupt. It is much more often because central government has chosen to let this happen.
Most of us would struggle if we lost a quarter of our spending power. The same is true for local councils. Place the blame where it is deserved. It is time for real reform.
