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6 March 2024

Bust Britain

As more councils go bankrupt, the nation’s public realm is dying. How did it come to this?

By Anoosh Chakelian

One recent misty morning in Taunton, the county town of Somerset, I was taken on a tour of our decaying public realm. The flowerbeds, which have won Britain in Bloom contests, will no longer be planted along the neat Victorian promenades of Vivary Park. Funding for the Brewhouse, a modernist theatre of Bourbon-biscuit-coloured brick decorated with a Shakespeare mural, is ending. At a popular café, a server with Down’s syndrome will lose the employment service that supports the job he loves. The local swimming pool was shut to make way for riverside flats and shops – where some units have sat empty for two years. A Georgian market house, home to the local radio station and tourist information centre, is “vulnerable”. A bus subsidised by the council, bearing its rusting white livery, will no longer run. Even the public toilets will close.

These were just a handful of entries on a “heartbreaking” 200-line spreadsheet the Somerset Council leader, Bill Revans, was toiling over when I visited (councils finalised their budgets in February). A burly retired history teacher and proud Somerset boy born in Taunton, Revans, who is 55, looked bereft. With his russet beard, crinkly-eyed smile and sorrowful baritone chuckle, he seemed like a reverse Father Christmas: he was taking things away, door by door.

Walking me through town, he mentioned defunding beach lifeguard coverage, school crossing patrols and recycling centres. Through a portcullis archway we reached a 12th-century castle, home to the Museum of Somerset. The yellow county flag emblazoned with a red dragon was fluttering from its roof. Even council finance for this museum was running out. “Imagine for a history teacher the prospect of cutting heritage,” Revans said.

While he was still trying to find temporary solutions and delays to some of these cuts when we met, Revans knew he was buying time. “This year, the choices are painful. Next year, they’ll be painful again, and the year after and the year after – until ultimately, the system will collapse.”

A market town redolent of old England, with its cobbled streets, Norman battlements and wrought iron gates bearing the coat of arms (“Defendamus Borough of Taunton”), had become a symbol of the new England too. Defendamus Boarded-up Debenhams.

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Somerset Council – run by Conservatives from 2009 to 2022, and the Liberal Democrats for the past two years – had to find £100m of savings, £35m of which would come from cuts. Last year, it declared a “financial emergency” and is close to filing a “Section 114” notice: the local government version of bankruptcy.

Councils have a statutory duty to provide certain core services, including social care (residential and community care for the elderly, chronically ill and disabled), but can drop so-called discretionary services. These can be as fundamental to everyday life as pest control, sports facilities and youth clubs.

Somerset is part of a wider trend. Eight councils have gone bankrupt since 2010, when the ConservativeLib Dem coalition began its austerity programme that sliced heavily into local government. These include major city councils such as Nottingham and Birmingham – the biggest council in Europe, which has voted to make savings by raising council tax by 21 per cent over the next two years, cutting 600 jobs, closing 25 libraries and even by dimming streetlights.

Northamptonshire, Croydon, Slough, Northumberland, Thurrock and Woking have also gone under. Twenty more councils are at immediate risk. (The New Statesman’s Spotlight policy section regularly updates an online map of councils in financial peril.)

It’s not just happening in England: nearly a quarter of Scottish councils fear they can’t balance their budgets this year, and Welsh council leaders have also warned about the likelihood of bankruptcies. Three Scottish councils, Comhairle Nan Eilean Siar in Stornoway, Aberdeen, and East Lothian, are in the top ten UK local authorities with the highest average debt, according to BBC analysis of data from the Department for Levelling Up, Housing and Communities. Overall, local authorities in Scotland face a revenue shortfall of £95m in 2024-25 – on top of the cost of a council tax freeze imposed by the SNP government, £160m of which may not be covered by central funding. In Wales, the leaders of Wrexham and Torfaen councils have warned “it’s only a matter of time” before bankruptcy (the former had made budget cuts of over £60m from 2016-20), and Rhondda Cynon Taf will have to strip services back to “ultimately only do statutory things”. The combined two-year shortfall of all Welsh councils adds up to £395m, as of last summer.

Crisis-ravaged councils span party colours and a range of different failings – including risky commercial ventures, financial mismanagement and bungled local projects.

In Birmingham, England’s second city, an equal-pay claim left to fester is costing the council £1.15bn. In Croydon, south London, the council set up its own housing developer – a company that collapsed and left 41 housing schemes behind that either had to be cancelled or sold on. Woking in Surrey ran up £2bn of debt on a property investment spree in hotels and high-rise flats. And Nottingham’s attempt at establishing its own energy company, the council-run Robin Hood Energy, failed because of problems with purchasing gas. In Thurrock, the Essex port town where the Tory-led borough council went bust in 2022, the council made wild bets on commercial schemes, including sinking tens of millions into solar farms as far as away as Wiltshire. Such decisions left the town without a return on its money but the private investors tasked with spending it very well-off.

On a recent trip to Thurrock, I found a town reduced to its bones. Residents were struggling with last April’s 10 per cent council tax rise (to be followed by an 8 per cent hike this year) and overflowing bins because of rubbish not being collected. The Thameside Complex, housing the town’s theatre, museum and library (deemed “surplus to requirements” by the council), was run down. There was a broken lift, faulty cinema screen, abandoned café and the light bulbs in the museum hadn’t been replaced. Even the dead weren’t spared. The price of burials and ashes interments in the borough had risen by 9 per cent. The cost of marriage ceremonies, and parking permits for carers and community nurses had also gone up. It will take Thurrock more than 20 years to repay the £635m government bailout.

The canary in the municipal coal mine was Conservative-run Northamptonshire County Council, which went under in 2018. In an attempt to save money it had outsourced key services (including child protection) to external bodies, and in some cases ended up being charged more than the market rate for them. When I visited at the time, the Tory MP for Northampton South, Andrew Lewer – who had run Derbyshire County Council between 2009 and 2013 – predicted that more councils would “be hitting this sort of situation in two or three years’ time”, even “well-run” ones. “They’ve reached the end of the road,” he told me. He wrote to cabinet ministers urging them to learn Northamptonshire’s lessons before it was too late. They did not.

Perhaps nowhere is the decline of the public realm more apparent than in our neighbourhoods. While the cases of Somerset, Thurrock and Northampton councils might seem extreme, they will not be unfamiliar to many readers. We have all experienced the loss or reduction of local services – we are driving on potholed roads, seeing more litter slithering down residential streets, and losing those communal perks we took for granted, such as the yearly free fireworks display on Bonfire Night.

Since 2010, councils have had 60 per cent of their spending power cut by central government, which aggressively reduced funding in a bid to reduce Britain’s budget deficit after the 2008 financial crash. (In 2009-10, the deficit reached 10 per cent of GDP, and the national debt was at 67 per cent by May 2010.) Government ministers encouraged councils to be more entrepreneurial and raise their own funds through commercial investment, and in 2015 abolished the Audit Commission, which had kept a check on their finances. Council officers became prime targets for dubious investment propositions.

At the same time, demand for the main service offered by councils – social care – has risen sharply, driven by both an ageing population and working-age sick and disabled people living longer. A rising general population in some areas is also putting further pressure on services: for example, London’s population has grown by around 900,000 people (11.2 per cent) since 2010.

This mismatch between funding for town halls and fast-rising budget pressures became known in the sector as the “jaws of doom” (because on a graph, the two diverging lines for funding and costs look like the mouth of Roald Dahl’s Enormous Crocodile stretching open). “We are slightly further down the gullet than others, but others are parting the teeth I think,” said Revans, with a sad laugh. Somerset’s central government grant in 2009 was £80m – now, it’s closer to £8.4m, and two-thirds of its entire budget goes on social care.

Councils have a duty to provide temporary accommodation for homeless residents, which is also straining budgets. A number of factors – including property price inflation, low levels of housebuilding, and restrictive planning regulations – have put housing in chronically short supply in the UK.

When I visited Hastings in East Sussex late last year, the council – in a borough full of Airbnbs and Londoners moving in and pushing up house prices – was spending nearly half its yearly budget on temporary accommodation, so expensive has housing become. The council leader was even calling for a “Homes for Ukraine” refugee-style scheme to house locals in people’s spare rooms.

Illustration by Alex Williamson

Inflation, too, is eating into local authority budgets. But central government has capped council tax rises and banned them from borrowing for day-to-day spending. Council tax itself, based on outdated property valuations (made in 1991 in England and 2003 in Wales), is regressive, as Paul Johnson, the director of the Institute for Fiscal Studies think tank, wrote in his 2023 book Follow the Money: How Much Does Britain cost?, which reveals that house price rises since rates were last set mean the average property in the Westminster council area is taxed at 0.06 per cent of its value, while a far cheaper one in Hartlepool is taxed at 1.3 per cent.

The government has budgeted £64bn for councils in 2024-25 – a figure that relies on 5 per cent council tax rises and the annual increase in central funding rising from 3 per cent to just 4 per cent. In January, more than 40 Tory MPs signed a letter to Rishi Sunak asking for more central funding for local authorities, to avoid significant cuts. An extra £600m was announced, but it is not enough.

All this creates an impossible calculation, and, across the political spectrum, there is a growing consensus among council leaders and national politicians alike that a tax based on 1991 housing valuations shouldn’t be the fund for social care. To change this, however, would mean a party being bold enough to touch council tax (reform of which risks accusations of introducing a “poll tax” or “mansion tax”) and the social care system (reform of which risks attacks over a “death tax” or “dementia tax” ).

None of the main parties has a plan to rescue councils. One Yorkshire councillor told me town halls are sinking even further into financial ruin as they wait in hope for the election of a more generous Labour administration. But Labour will face the same economic constraints as the Sunak government and is committed to many of its spending plans. While Labour is planning multi-year, rather than one-year, funding settlements to help councils plan their finances better, the shadow local government secretary, Angela Rayner, has said it will take “a long slog, not a magic wand” to fix local authorities. Labour councillors have warned me that the party’s plan to negotiate a fair-wage deal for carers within its first 100 days in office could topple further councils – as they pay carer wages.

Even when “levelling up” – regional economic rebalancing promised by Boris Johnson in 2019 – was a priority in Westminster, councils weren’t part of it. Michael Gove, Secretary of State for Levelling Up, has suggested the number of councils at risk of bankruptcy is exaggerated, and instead threatened to sanction councils that bring in a four-day week for staff and condemned local “equality, diversity and inclusion programmes” (EDI). Jeremy Hunt, the Chancellor, echoed the latter point ahead of his March 2024 Budget, and accused councils of wasting money on consultants. The time for efficiency savings, however, has long passed. Gove’s department is planning to make it easier for councils to sell off buildings and other assets to try to raise £23bn for the local government budget. Already, English councils have sold off a yearly average of 6,000 assets – including swimming pools, sports pitches and libraries – since austerity began in 2010, according to the Institute for Public Policy Research.

A local government insider suggested that before the election, Gove is unlikely to let further councils go bankrupt as “otherwise it looks more like a national problem rather than something you can blame on individual council leadership”. Instead, he is expected to relax borrowing rules for those that request it. Sunak, meanwhile, has urged “restrained” council tax rises (while his government allowed Thurrock to raise its increase above the 4.99 per cent cap – to 9.99 per cent – last year).

Collapsing councils are a microcosm of the British state’s failings: austerity, short-termism, Treasury myopia and decades of failure to solve the so-called wicked problems of policymaking, such as council tax, planning and our broken social care model. Every block in the Jenga tower appears to be wobbling.

 The NHS is stuck with one in ten jobs vacant, crumbling buildings and equipment, strikes and poor patient outcomes. Welfare is no longer acting as a safety net: the UK now has record levels of long-term sickness at 2.8 million and a system too threadbare to propel people back into work. So depleted are our armed forces that military chiefs mull the return of conscription. Police fail to solve 90 per cent of crimes. And best of luck to anyone who encounters a prison or courtroom.

Everywhere you look, the country is blighted by neglect and decay – literally, in the case of the nation’s teeth. Dentistry is so overstretched that police had to control a queue that had amassed along a road in Bristol for the opening of a new dental practice in February. The government released a hasty “Dental Recovery Plan”, intended to incentivise dentists to offer more appointments: the British Dental Association’s head said it wasn’t “worthy of the title”. Labour’s big idea is supervised tooth-brushing for children aged three to five. But after the policy was announced, I heard that nursery heads warned party insiders they didn’t have enough sinks or staff to do this.

Bust Britain is coming for the universities next. Domestic tuition fees, capped at £9,250 a year in 2017, haven’t risen with inflation, and the number of UK students applying is falling. This unsustainable funding model pushes universities to rely on higher foreign-student fees and compromise on the quality of teaching. Meanwhile, the government tightens visa rules for those coming to study in Britain.

Decay has also advanced in those sectors where the private sector owns vital national infrastructure. Water companies pollute our rivers and beaches as bills go up. The Royal Mail can’t even deliver hospital letters on time. Energy firms rip us off. Train services are a shambles. While the British public struggles with poorly run services, shareholders and, ironically, foreign governments (rather than the UK taxpayer) benefit. EDF Energy, Britain’s fourth largest household energy supplier – which is building the country’s long-delayed first nuclear power station in a generation – is 90 per cent owned by the French government. Avanti, one of Britain’s least reliable train operators, is part owned by the Italian state.

As a weak streak of mid-morning sunlight broke through the fog in Taunton, Bill Revans returned to his desk to work out what he could rescue in the town of his birth. “You want to have a pride in the place where you were born, grew up, and raised your family,” he said. “But how sad it is to manage decline.”

[See also: British steel’s apocalyptic future]

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This article appears in the 06 Mar 2024 issue of the New Statesman, Bust Britain