As if it were not bad enough that wages are not keeping up with inflation, that the cost of living has soared and the NHS is being bled to death by privateers, more and more details are now coming to light regarding the serious financial troubles of many local councils, most of whom will be forced to cut back harshly on the services they provide in order to avoid insolvency.
A poll of local authorities in November 2022 found that four out of five feared that they faced imminent insolvency, and some have already gone under.
“Thurrock council’s spending will exceed its income by nearly £500m this year, thanks to a series of disastrous investments that have plunged the borough into effective bankruptcy,” reported Andrew Ellson of the Times recently. (Second revolt stirs in Thurrock as taxes rise for huge council debts, 10 February 2023)
A similar story has emerged regarding Croydon council, which has been in trouble for a while: it now has debts of £1.6bn!
In 2021, Labour-controlled Slough council declared itself effectively bankrupt after the discovery of a ‘catastrophic’ £100m black hole in its budget, following closely on the heels of Northamptonshire, which declared itself insolvent in February 2018, having projected that without help it would have a £69m black hole in its budgets by 2021.
More cuts needed to pay for interest payments on gambling debts
Vital services (which ratepayers will have believed they have in fact paid for via their steep council tax payments) are going to ‘have’ to be cut (assuming there will be no substantial government bailouts), as disclosed by the November 2022 survey of local authorities.
“The survey revealed that two-thirds of the councils say that it’s ‘likely or very likely’ that they will pause or cancel some economic growth and major road projects, as well as routine road maintenance.
“Most said that it is ‘likely or very likely’ that they will need to tighten eligibility for adult social care services and reduce reablement and community-based adult social care services.
“Nearly two-thirds said they would scale back school transport services, and nearly a half said they are ‘likely or very likely’ to have to cut support packages for young people with special educational needs.
“A similar number said that they will need to reduce the number of children’s centres and youth services.
“Bus route subsidies, streetlighting, library provision and recycling centre opening times are also ‘likely or very likely’ to be impacted for most councils.
“And action on climate change is ‘likely or very likely’ to have to be scaled back.” (One in five councils believe insolvency can be prevented without additional support from the government, Devon County Council News, 11 November 2022)
A substantial part of the losses incurred by such councils as Thurrock and Croydon are attributed with hindsight to ‘financial mismanagement’, which means trying to boost the council’s finances by resorting to risky investments, many of which have recently gone belly-up. Local ratepayers would no doubt be shocked to know that hikes of 15 percent or more in their council tax bills are paying for what are essentially speculation losses – gambling debts, in other words!
Nor will they be best pleased to find that the money they provide to fund services is increasingly being used to pay millions of pounds in interest to various financiers. Of course, it is probable that some degree of impropriety has been involved in running up these astronomic shortfalls, but the real question is: why do councils find it necessary to gamble with their funds? And why do they find it necessary to borrow?
Obviously, it is because they are underfunded and struggling to pay for the services that they have a statutory duty to provide.
Part of the reason for this is that, at election time, boasting of never raising council tax, or raising it less than other councils, appears to be a vote winner. But the more important reason is that central government is not allocating the funding that is needed given the level of services local authorities are required to provide.
But of course, central government is itself insolvent and forced to borrow heavily to meet its own needs. The more it borrows, the more it is likely at some time to default, and therefore the higher the rate of interest it has to agree to pay in order to secure the loans it needs.
Only the bankers win in this scenario. That is capitalism, red in tooth and claw, profiting at the expense of the millions of working people whose living costs are going through the roof while they are increasingly losing out on the services and benefits that used to be supplied. No chance of a council house, no care in old age unless you pay through the nose, the NHS in crisis, etc.
The government is unable to raise enough money in tax to keep up with its expenses, because unless taxes are low no capitalist is easily ready to set up a business here that will pay tax, so the government works on the principle it is better to collect low taxes than none at all.
Even so, capitalists find it only too easy to find other countries where they will have to pay even less. This is how the billionaires keep getting richer and richer while the working masses suffer.
And to add insult to injury, the British government is spending billions to fund Nato’s war in Ukraine, hoping that some time in the future little Britain will be rewarded for its loyalty to Uncle Sam, who is happy to sacrifice the lives and wellbeing of the entire Ukrainian people to further its quest for world domination by putting Russia out of action.
Are the British working people mad that they tolerate this situation?
“Thurrock, in southern Essex, was the birthplace of the peasants’ revolt more than 600 years ago, when local farmers refused to pay Richard II’s hated poll tax. Now malcontent is brewing once more along the Thames estuary after the government gave permission to increase council tax by 10 percent without a referendum because of the dire state of the borough’s finances,” says Andrew Ellson. (Op cit)
Time to get out the pitchforks – and not only in Thurrock!
As we go to press, the Sunday Times has exposed the fact that Woking, Spelthorne and Warrington councils are also in extremely deep trouble. We can expect more to follow. (Five councils that dabbled in business – and regretted it by Jon Yeoman, 26 February 2023)