Birmingham Council declared itself bankrupt yesterday. The biggest local authority in the UK cannot now balance its budget. There may be very particular circumstances that explain the crisis in Birmingham, but it is far from being alone in facing this situation. Some forecast suggests that one-third of UK councils might have to make such a declaration in the next year.
At the same time, as the Financial Times notes this morning, the audit of English local authorities is in a complete mess. Since it became a statutory requirement that local authorities be independently audited by a private sector firm in 2015, many of the firms willing to provide such services have withdrawn from the market. That is either because they lack the expertise to audit local authorities or because they simply cannot afford to do so on the basis of the fees that are available for this service. The consequence is that the vast majority of councils in England now file their accounts late, and some have many years of accounts overdue for filing at present, with no sign of this problem being resolved at any time soon.
To be blunt, the failure of financial control in England's local authorities can now be added to the long list of broken services in this country.
There was a time when local authorities were the foundation of effective government in the UK. They provided energy, transport, housing, education, and even health services, often without much support from central government. Birmingham was at the forefront of this under the inspired leadership of Joseph Chamberlain. Funding themselves with a combination of local taxes and borrowing, mainly from the communities that they served, financial probity was essential if the confidence of those who provided them with capital was to be maintained.
And now, due to government dogma and market failure, these councils, and their finance systems are failing.
The failure of neoliberalism is written all over this, not that neoliberals will see this that way. For those who hate government, its collapse is not a cause for concern. For everyone else, and for all those who depend on it, which most of us do at some point in life, this failure is catastrophic and the clearest possible indication that market economics and the need to deliver high-quality public services do not necessarily, or even very often, coincide.
Will we learn that lesson now?
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The problem with local funding for local councils is that those areas with the greatest need will have the least ability to raise funds. So that some central government funding is essential. When this is continually reduced, councils are reduced to any measure they can use.
For Brighton, an important source of income comes from traffic cameras.
https://www.brightonandhovenews.org/2022/01/24/the-2-million-bus-lane-cameras-snaring-thousands-of-brighton-drivers/
Setting up a poorly signed compulsory left turn, where the obvious route is straight ahead, can provide essential revenue. Inequitable, counterproductive, absurd, but what are the alternatives?
As far as I can see, only central government can offer progressive taxation with distribution according to need. As this gradually dries up, we get to where we are today.
Agreed
It is an issue I will address in my tax series.
Have you looked into how counties and municipalities (cities) are funded in other countries such as France, Canada and the USA? Based on articles and posts read on this blog, it seems to me the whole UK local funding system needs to be massively overhauled or completely replaced.
As I work for one, I think it reasonable for me to raise that most Councils have had to create an internal macro economy of internal charges to prop up incomes derived from services and government grants.
This is one of paradoxes created by the way council services have been salami sliced by private sector working practices and accountants over the years going back to compulsory competitive tendering – we have departments charging each other internally for services just to survive – treating each other as outside contractors!! But it all comes from council budgets – a way of endlessly circulating council money.
However, the proof in the pudding is just how many people have not been replaced, and my council’s increasing reliance on agency workers is proof of that.
A lot of Councils have not had true recompense for coping with Covid and have not been allowed to claw any of that money back.
Birmingham (and others) is a victim of a system that is designed not to work.
Agreed
That was the neoliberal goal
An auction room, somewhere in a posh part of London:
Auctioneer: The British gov’ is offering for sale one Uk city council – to whit – Birmingham City council – this is for sale with no debt and only one careful owner. The fortunate bidder will gain a sizeable property portfolio with no obligations to retain the current work force (somewhat larger than the staff in the European Commission) which could be easily downsized. I propose to start the bidding at £10 billion
Auctioneer: ah – a bid of £12bn from Rapacious VCs-r-us – ah another bid from the Saudi state of £14bn
etc etc.
I hope I am not giving the vile-tories ideas.
“He who sows the wind, reaps the whirlwind”, as we are now experiencing the result of Thatcher’s pathological, even hysterical (both medically defined? Possibly) sowing of the wind in the form of her hatred of local government, expressed in the desire to have a totally centralised neo-feudal State, with ALL power invested in the Tenant-in-Chief, the Monarch aka the “Free Market” (just as children helieve in the “tooth fairy”!).
As to what I believe was Thatcher’s hidden gameplan, I’ve posted that before = the neo-feudal State, in which the 1% become the new aristocracy, with ALL the rights, and NONE of the obligations, including payment of tax, from which they’ll be exempt.
The land element of mediaeval feudalism will be added to by government revenue streams – the VIP PPE and the Dido Harding Test and Trace scams being classic examples of the same.
The other 99% become neo-feudal serfs, with NONE of the rights, but
ALL the obligations, including tax (thereby paying for the 1%’s existence, and also for any and all services that used to be free at the point of delivery.
One final point, the 76th to 99th percentile cheered on the Tory attacks on the1st to 50th percentile, and accepted without demur the movement up into the 51st to 75th percentile, totally failing to realise they were next in line to be asset-stripped, inmiserated and bumped into the precariat.
Just watch how the smile will vanish from their faces when they realise they’re next for the chop, from a government of the 1%, by the 1% for the 1%.
You were warned, people, but you preferred to follow Johnson, the snake-oil merchant, Truss the Headless and shyster Sunak, rather than a costed and relevant to the need offer in 2017 and even 2019.
When a woman marries again, Samuel Johnson says it marks the triumph of hope over experience. Alas, when one votes for Cameron and post-Cameron Tories, it marks the triumph of stupidity over evidence!
The virtually complete evisceration of local government since the early days of the Thatcher regime and experiment, and then intensified under New Labour has now reached its endgame, greatly intensified by the easily predictable consequences of the purely ideological austerity of Osborne and Cameron.
Birmingham is not the first local authority to hit the financial buffers, but it is the first and largest of the major conurbations that could end up in this situation. When more start to join this particular group, at an ever increasing speed – I could have said “rate”, but that would have been just pure irony – then perhaps those infected by the neoliberal virus will pause to question their own clearly unworkable beliefs, although I personally doubt it.
As the American PJ O’Rourke famously wrote, the Democrats say government “can make you richer, smarter, taller and get the chickweed out of your lawn. Republicans are the party that says government doesn’t work, and then they get elected and prove it.”
Same in the U.K., but who are the Democrats in the U.K. now Starmer has gone to the dark side?
There are none.
Possibly, just possibly if Scotland does go independent, whatever coalition ends up running the show could possibly set an example of a well-being economy that may influence in England to demand preferential voting and a well-being economy there as well. It’s a concept that at least 60% of Scots believe and perhaps freed of Westminster incompetence greed and corruption it may just happen.
The problem in Scotland is that the SNP is obsessed with independence and has no coherent approach to actually running public services. Of course it is handicapped by being so dependent on the Barnet formula for central government grant but until recently failed to use even its limited tax raising powers. Like Labour it was terrified of being labelled a tax raising party.
Given the mismanagement of several infrastructure projects by the SNP government I’m not sure that an independent
Scotland would provide much by way as an example of good governance to Westminster.
See my article in The National today where I address this
@Stephen Perry
Scotland
I seemed to the recall the irony of Cameron complaining about the cuts his Oxfordshire council were force to make as a result of his government’s policies (found it here https://www.independent.co.uk/news/uk/politics/david-cameron-clashes-with-conservativecontrolled-oxfordshire-council-over-cuts-to-frontline-services-a6729616.html).
But wasn’t it a deliberate (“brilliant”) Tory strategy to force councils to make cuts to take the heat off the government?
Oligarchy has been described as a form of debased aristocracy. There is no merit only entitlement. And accordingly to save not only the economy and our democracy we need to neuter their political power. I’m convinced that in truth, England needs more devolved government, and local councils can provide that, and should have more control over their own economy. It was only ever centralised so that it would be easier to choke their power.