Less than two years ago the Levelling Up white paper set out, in vast detail, how the government intended to tackle the UK’s vast regional inequalities and drive growth in every corner of the country through greater empowerment of local leadership. Yet this week, the council in charge of governing the second largest city in the country—a city that was meant to become an “engine of growth”—has effectively declared itself bankrupt.
People will come to different conclusions as to how we got to this point. One reason is that Birmingham Town Hall has paid out almost £1.1bn in equal pay claims since 2012, following shocking revelations of institutional gender pay inequality spanning decades. West Midlands Mayor Andy Street’s statement following yesterday’s news lambasted Birmingham City Council’s leadership for failing to balance their books. The council’s finances have, after all, been flashing warning lights for years, while poor decision-making has continued. There is perhaps no better example than its recent troubles implementing a new IT system, which added an extra £100m to costs.
But pinning the blame squarely on the council leadership is disingenuous, for much the same reason that government ministers seeking to shift blame for the ongoing Raac scandal to local authorities represents a chronic deflection of responsibility. Local government finances are in a state of peril, and like the crumbling of our schools and hospitals, it is a direct result of the consequences of austerity finally coming home to roost.
Local government budgets have been cut more than any other part of the public sector since 2010, with those in the poorest areas regions facing the steepest of all. Birmingham, one of the most deprived areas in the country, has been hit hard. At the same time, demand for statutory services that local authorities are responsible for delivering, including children’s services, adult social care and housing and homelessness, have risen significantly, yet greater demands on statutory services have not translated into further funding to maintain the delivery of local services. Most authorities have repurposed funds from “non-essential” areas to meet their statutory obligations—with investment in physical, social and environmental infrastructure such as schools often being laid on the guillotine first. Data from the Office for National Statistics suggests that since 2010, the local government workforce has shrunk by 28 per cent.
There is very little that councils can do themselves to fill the gap that austerity has created. They have limited powers to raise council tax, and doing so is rarely, if ever, popular. Reforming business rates, which are set by central government, is beyond reach. Local government’s core budgets have become short-term—since 2018/19 they have been set on an annual basis rather than multi-year, making long-term financial planning more difficult. Struggling councils are, to put it plainly, at the mercy of central government to help shore up their accounts. Rarely are their calls answered.
So what can councils do? Many, Birmingham included, have put vast efforts into reforming local services so that they take a more preventative approach to issues such as healthcare, which, if successful, can significantly reduce costs while improving outcomes. But with budget and staffing cuts as severe as they are this is no simple feat, particularly in frontline services with the most acute demand, where positive intentions for reform often fall flat when day-to-day pressures claw back focus.
But even where there is success, there is no guarantee reform alone can be enough to offset budgetary constraints. Not far from Birmingham, Coventry City Council’s housing and homelessness department, where I used to work, has won national awards for its achievements in shifting their homelessness service towards a preventative model and improving local housing outcomes. The council has also made great efficiency savings by joining-up local public services—Family Hubs, where those with children can access resources from multiple agencies all at once, are a good example. But despite best efforts, it is unlikely this will be enough to turn the tide. Just last month Coventry issued a statement stating that it was facing a multi-million-pound deficit. Like Birmingham, it is on the brink of declaring bankruptcy.
Birmingham is not the first council to find itself in this position, and it won’t be the last. But if we want local governments to become engines of growth and providers of first-class public services then we need to seriously rebuild local government capacity, stabilise local government finances, and encourage more diverse revenue streams. This will take a considerable sum of money. But just as the cuts that government made during austerity mean we now must spend a fortune rebuilding classrooms, sooner or later, we’ll have to do similar to rebuild our councils.
