A BBC survey has found nine out of ten major local authorities in England with not enough cash to cover their spending plans in the financial year 2021-2. Coronavirus could lead to them going £1.7bn over budget. To keep services going, say council leaders, billions cut from central government funding to councils over the last ten years must be restored.
Although higher than previous settlements under Tory governments since 2010, the council funding settlement for 2021-22 is radically insufficient. Already one in six children’s centres and nearly a thousand libraries have closed. Councils have lost large and widely-varying chunks of their revenue through the pandemic, and have spent heavily for the same reason, with central government covering only part of the extra spending.
Council tax will increase again in real terms in 2021-2, taking it to 60% of council income. The government has eased its curbs on councils raising council tax, and allowed them to make an additional increase via adult social care precept.
Over the years since 2010, there has been a shift from central grants to local funding, which is often unstable as businesses close and residents lose their jobs and cannot pay.
Those factors will affect councils unevenly depending on local economies and balance of tax bases. Revenue losses due to Covid-19 are unevenly distributed, and so are losses due to pandemic-caused falls in property prices.
Councils have taken on what the Public Accounts Committee calls “extremely risky levels of debt in recent years” by investing in commercial ventures “in an effort to shore up dwindling finances”. With lockdown closures and an economic crisis, those commercial investments done as ploys to make up lost grant money will bring huge budget pressures.
In Nottingham, the collapse of the council’s Robin Hood Energy company is projected to have lost it £38m. The council will be putting up bills by 5%, as well as making cuts, which means axing 272 jobs, reducing services and charging more for other things it provides.
Manchester Airport was built by the city council, and it has owned a large chunk of it ever since. The pandemic has brought a loss of airport income that will affect budgets for years to come.
In the past 20 years the Manchester Airport Group has bought Stansted and East Midlands airports and, in 2011, created Airport City, one of the government’s low tax Enterprise Zones. Manchester City Council holds the largest stake with 35.5%, while the region’s nine other councils share a further 29% between them. In 2018 they received more than £110m between them, with nearly £60m going to the City Council. And now?
Labour-run Luton Borough Council has also lost expected airport revenue. It has passed an Emergency Budget to cut spending and avoid a financial shortfall of £49 million. The council is the major share holder in Luton airport. The council’s emergency response threatens 365 jobs as well as key services.
Bath and North East Somerset Council owns over 1000 commercial properties, and the council relies on rent from those to make up losses in central government grant money. The council announced a wholesale “review” in December, after losing millions in rent payments.
Social care provision is a big chunk of local government spending, and so is likely to see cuts where councils have lost revenue. The Coronavirus Act allows for “easements” to the Care Act, meaning that councils have been allowed to evade their previous statutory obligations to assess and meet the needs of sick and disabled people and their carers.
The impacts will be far more acute in some areas than others. Neither the local government unions nor Labour has yet initiated any across-the-board anti-cuts strategy, so action will probably start in particular councils or group of workers, and with resistance to particular local cuts in particular services.
We must extend solidarity to all those local government fight backs, rather than allowing them to be isolated.
The Labour left and Momentum should build a national strategy for fighting for an increase in local government grant funding as well as supporting the campaigns.