Cuts are killing local government

Britain’s local government is withering on the fiscal vine. Though a quarter of public spending is still administered locally, a mere 15 per cent of that quarter is covered by local taxes. Services are now almost all ordained by central statute. Council taxes and spending is largely determined by the Treasury. Councils are little more than agencies of Whitehall, coated in a veneer of democratic election.

Popular caricature has David Cameron’s coalition making deep cuts in public expenditure. This is untrue. In 2009, the high point of Gordon Brown’s supposed squandermania, total government spending was £633bn. After four years of “austerity” it is £718bn and rising. Even in real terms it dipped only once, by 1.5 per cent in 2011/12. George Osborne is the highest spending, highest borrowing chancellor in British history.

The chief reason for this is the ring-fencing of the cabinet’s favourites: health, education and overseas aid. Even the government pay bill, supposedly “frozen,” was rising until this year. Indeed, Osborne’s buoyant public spending could be the major driver behind the current recovery. “Austerity” was public relations to please ratings agencies.

The one sector to which austerity has been aggressively applied is local government. Council spending has been falling since the coalition came to power by almost 10 per cent a year. In the past 12 months, while central government employment has risen, an estimated 150,000 local government jobs have been lost.

The impact can be seen across the entire range of local services. Those for children and the elderly have been cut back. Social service departments reduced home help visits from an hour per client to half an hour— in some cases to 15 minutes. Day centres have been closing by the dozen. This has crippled efforts by the NHS to return patients from geriatric wards to the community. Education committees have been forced to postpone school building.

Libraries and swimming pools are shutting. Newcastle announced it would suspend its entire arts budget (amended, after protests, to half). Cuts are being made to the theatres and galleries in Manchester, Leeds, Sheffield and Westminster. Meanwhile the Department of Culture’s budget has risen to £6.7bn (excluding the Olympics) in 2012.

Unlike central government, councils cannot borrow for day-to-day spending. While central revenue from income tax has been rising, the refusal to revalue local properties and the capping of council tax have exerted a downward pressure on local revenue. The 15 per cent of local spending covered by local taxes compares with half in the 1980s and 55 per cent across most of Europe.

The shift in control over the public sector from localities to the centre began under Margaret Thatcher. It has turned a pluralistic welfare state into a monolith, to a degree unknown in any other democracy. In health, housing, unemployment and social benefits, parliament demands ever more standardisation, criticising any variation as a “postcode lottery.” One-off scandals in local government, such as in Haringey social services, mean universal central intervention. Scandals in central government, such as Staffordshire hospitals, are without accountability.

In opposition Cameron deplored this erosion of localism as “taking the power of decision about local spending and local taxation out of the hands of local voters and handing it to remote central bureaucracies.” Like so many newcomers to power, when Cameron found he had a “remote central bureaucracy” of his own, he hugged it close. Under his 2011 Localism Act, councils were forbidden from raising council tax by more than 2 per cent above central targets, except by specific referendum. No council has yet held one (though Brighton is considering it).

While many councils are still contriving to meet their cuts targets, the squeeze on spending is remorseless. The latest Treasury figures show UK tax revenue due to rise by 4.6 per cent in 2014-15. Some is bound to be deflected to meet crises in deteriorating local services, though such funds are invariably ring-fenced and therefore controlled from Whitehall. Indeed the Treasury is now making grants available to fend off this outcome, specifically to compensate for local taxes being capped. Brighton has been offered £2.4m not to go to a ballot, so ministers can claim to have held down council taxes.

Britain’s government is prepared to increase central taxes purely to avoid increases in local ones, to stop local people even being asked if they want them raised. This “bribe against democracy” must be the crudest centralising measure in fiscal history.