Local Government feels the effects of austerity

Photo: El Stapaldor
The effects of austerity are very visible in the attacks on local government spending. Underfunded council services are one of the first points of impact for the poorest and most vulnerable in society, writes Scott Tyler.  And now the reality is less that services are underfunded – more that, increasingly, many services have ceased to exist altogether.

Councils have borne the brunt of cuts, especially in the poorest areas, where they are most dependent on government grants. The Economist estimates that councils most heavily dependent on these grants have cut services by an average of 33% since 2010; whereas the councils least dependent on it have cut by average of 9%.

Overall, councils have cut spending cut by 22% since 2010. For the current financial year, nearly all councils have raised council tax – in many cases substantially.

The Tories had previously imposed a cap of 2% on council tax rises (unless a council could win a mandatory local referendum on a higher rise), but more recently they have allowed council tax rises of up to 6% if the additional money raised goes to adult social care. This does little to resolve the crisis in social care and simply passes austerity on directly to local councils – a recurring theme for the Tories.

In fact, the Tories’ longer term plan is to make councils “self-financing” by 2020.  The central government grant will be all but abolished and councils will be left to raise all the revenue they need through council tax and business rates.

The latter is supposedly an “incentive” for councils to “stimulate economic activity” in their areas to reap the rewards through bigger business tax revenues.  The big danger is that this will distort policy-making in favour of revenue-raising and over-development to the detriment of social need and the environment. Many councils are increasingly becoming big-business organisations.

This has echoes in Cameron’s “big society” idea, where decisions would apparently be devolved to local people and in some cases, groups of locals could bid to run services themselves.  In effect, the Tories’ idea of “localism” simply means councils and citizens becoming the transmission belts for cuts.

Local government leaders (of all parties) are now on record as saying that local government is becoming financially unsustainable.  Research carried by the Local Government Information Unit shows that 80% of councils fear for their long-term financial stability.

Amid all the talk of “profligate” Labour councils, it is ironically Tory councils which are in most danger of going bust.  Tory Northamptonshire is close to bankruptcy and on May 10, Secretary of State James Brokenshire sent in commissioners to take over the running of the authority. Tory Surrey is carrying a huge deficit, and Somerset is also in trouble. It remains to be seen whether councils are “too big to fail”!

The cuts have arguably been most keenly felt in adult social care, which is in crisis, caused by underfunding and outsourcing to poor quality companies.  But most recently it is schools and other children’s services which have become the areas of greatest financial pressure for councils.  In particular cuts in Sure Start, youth work and provision for special educational needs have bitten really hard

At the same time the lack of council house provision is a major issue in most authorities. Neoliberal policies as well as central government cuts have wreaked havoc over decades. Thatcher’s right to buy legislation, through the 1980 Housing Act is rightly derided by the left – but the idea first appeared in Labour’s unsuccessful manifesto in 1959! And Labour has been at best hesitant to oppose the policy, including in the April 2018 Housing Green Paper. This is despite the fact that as the Green Paper itself says: “Homelessness is up by 50% since 2010, rough sleeping has doubled, and 120,000 children are without a home to call their own”. And even at the electoral level, housing – from homelessness to overcrowding and major problems such as endemic damp, from gentrification to lack of tenant involvement are one of the most persistent complaints on the doorstep.

The response of Labour and the unions

The response of Labour councils to the assault on local services has been abject. There has been no campaign of resistance to government cuts.  We are a long way from the 1980’s, when some Labour councils were prepared to refuse to carry out Government financial dictates.

Under New Labour, it was often Labour councils pursuing the most neo-liberal proposals. And while the membership of the party has changed significantly under Jeremy Corbyn’s leadership, there has been less change amongst councillors (as well, as has been more often noted, amongst the Parliamentary Labour Party. In many cases it has been Labour councils who have carrying through neoliberal policies against the communities they supposedly represent– for example with gentrification schemes like the Haringey Development Vehicle, handing housing management over to TMOs and privatising services and embracing PFI.

Labour councillors have also gone along with the Tories’ phoney “devolution” ideas which, again simply involve devolving cuts decisions.

Much of this is a consequence of the failure (so far) of the Corbyn revolution to permeate down to Labour councillors.

The response of the local government unions has been similarly passive. Resistance through industrial action has been generally isolated.  There has never been co-ordinated national action against cuts – or hardly even action across an entire council for that matter. Individual branches and small groups of workers have been left to fight alone.

The one national campaign of strike action – in defence of pensions joined by other public sector unions – was quickly squandered with the unions ultimately accepting cuts to pensions.  Pay bargaining has become increasingly fragmented- many councils out of national bargaining altogether, and even on the National Joint Council less and less is negotiated nationally.  The situation has not been helped by divisions on the Left in Unison, the largest of the local government unions.


Much of what Shadow Chancellor John McDonnell has said about local government is about going back to a time when local councils ran much more of the local infrastructure than they do now – utilities, transport.

A report commissioned by McDonnell states –

“Labour therefore proposes a different sort of public ownership. Local authorities, trade unions and workers, all of whom are seen as more responsive than expert panels to local needs, would play a greater role in the management of services. Councils would help run regionally owned utilities, for instance. ‘National state ownership of the grid and infrastructure of electricity and gas sectors could be combined with local, regional and community ownership,’ the report says.”

(From report “Alternative Models of Ownership” commissioned by McDonnell.

Reported in The Economist 18/5/18).

There has been much talk about “the Preston model”, based on the work done by Preston Council.  This involves keeping spending and procurement decisions local, so that wealth generated stays in the local economy.  The approach is best summed up by this from a Guardian article-

“Where other authorities privatise, Preston grows its own businesses. It even creates worker-owned cooperatives” (Guardian 17/3/18).

The Preston model is often quoted as “Corbynism in local government”, and it is a positive development which Labour authorities could be replicating across the country. It is clearly better than councils effectively lining the pockets of the likes of Carillion and Capita. However, it does not in itself solve the issue of local government funding.

Local government is an area to which Momentum should pay more attention.  If we want to change Labour in local government we need new people putting themselves forward as councillors and stronger channels of accountability between councillors and party members.  Momentum could have an effect here by mobilising people to put themselves forward as councillors, and providing training for aspiring candidates.

What we should be demanding from Labour Councils now and a Corbyn Government in the future

  • Labour Councils should fight austerity, not implement it.
  • We need a fair and genuinely redistributive system of local taxation.  Council Tax is highly regressive, taking a greater proportion of the income of the poorest residents than the richest.  This has been made worse in the last few years by the cuts in rebates on council tax which are given to those on the lowest incomes.  It used to be the case that people on Jobseeker’s Allowance levels of income would pay no council tax at all, but this is now almost never the case now.  Labour councils should not be passing on these cuts in rebates.  Labour should be looking seriously at local income tax and taxes on land, wealth and property, which effectively tax the rich rather than the poor.
  • Labour in government should end central government restrictions on how councils raise and spend money.
  • Keep and bring services in-house, run by directly-employed labour, and based on democratic control by workers and service users.
  • End PFI and write off PFI debts – it is a scandal that local authorities and hospitals are locked into huge repayments to private firms which continue long after the original project has effectively been paid for.
  • Housebuilding – requisition brownfield sites and empty properties. We need new homes but we need to build them in an environmentally sustainable way.  Councils should be using direct labour or unionised and safe firms for building projects.  Labour should fight for council housing to be seen the aspiration for the many not the few.
  • End the “right to buy”
  • Give councils effective powers to regulate private rents and to enforce minimum standards in the private rented sector.
  • Investment in adult social care.
  • Local government could also be a key player in the development of an integrated, publicly owned public transport system.  This would reduce traffic congestion and harmful emissions.
  • Full resident and tenant democracy at a local level – genuine “localism” where real decisions on spending and investment are taken, not just an offloading of the management of austerity.
  • Abolish elected mayors and cabinet-based local government
  • Labour group leaders to be elected by party members.
  • Reinstate full national bargaining with local government unions.


Share this article

3 Comments on Local Government feels the effects of austerity

  1. Margot Lindsay // 8th June 2018 at 8:17 pm // Reply

    Excellent well thought out proposals to demand from a Labour Councils and a Corbyn government.

  2. Philip Ward // 8th June 2018 at 9:33 pm // Reply

    One problem with financing local services entirely through local taxation is that more wealthy areas will be able to raise far more in taxes than poorer ones. This means that there has to be a system of national oversight in order to remedy this problem. There also needs to be national – and potentially international – coordination of public transport and utilities. They cannot function efficiently without this. The current mess indicates that this is so.

  3. If debt cancellation (of PWLB debt) was applied local authorities would have potentially additional spending of £5 billion a year. In addition there needs to be a process of equalisation based on local estimates of need, something which was abandoned by the coalition in 2013. See https://martinwicks.files.wordpress.com/2016/11/localgovfundingcrisis.pdf

Leave a comment

Your email address will not be published.