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As Britain’s town hall services crumble, the case for reform is overwhelming

<span>Photograph: Neil Hall/EPA</span>
Photograph: Neil Hall/EPA

In most of Britain’s towns there are buildings hinting at a more prosperous past. Vast stone public libraries, swimming baths and theatres; all encircling the grand town halls that once controlled them. Many are long shut, converted or owned by someone else. But the symbolism remains – local government used to do stuff.

Today, England’s councils are in the worst crisis since the foundation stones of these municipal palaces were laid.

Birmingham, the largest local authority in Europe, is the tip of the iceberg in its effective bankruptcy. Croydon, Northamptonshire, Slough, Thurrock and Woking have all gone bust. Dozens more are perilously close – from “red wall” Stoke-on-Trent to the blue-blooded Royal Borough of Windsor and Maidenhead.

As the Conservatives hold their annual conference in Manchester this week, the collapse of the English system of local government ought to worry Tory MPs far more than HS2, taxes or the rights of motorists to drive faster than 20mph.

In the backyards of current and former cabinet ministers, in important target seats, and across the country at large, a wave of local austerity is coming.

Related: HS2, Raac, potholes: the symptoms of a lack of investment are everywhere | Torsten Bell

“I often quote it, and misquote it – but the phrase here is Denis Healey’s ‘the sky is darkening with the wings of chickens coming home to roost’,” says Tony Travers, a professor of local government at the London School of Economics.

“Had the government wanted to go out of its way, back in 2010, to ensure nearly 15 years later that people were absolutely aware of how austerity was being delivered, they couldn’t have gone about it in a better way than this.”

England’s councils are facing a collective multibillion-pound black hole in their finances, up to £3.5bn on one estimate, as the impact from an almost 60% cut in central government funding since 2010 collides with stubbornly high inflation and pressure on services from an ageing population.

The result will be yet deeper cuts to public services, council tax rises and ever higher fees for parking and other council charges. Already since 2010 there have been £15bn worth of public assets flogged to help plug holes in council budgets.

But, where there is anything left to cut, close, privatise or pass into charity hands, get ready for that too. Just ask people in Woking and Kirklees, where plans announced in recent weeks include the closure of swimming pools, care homes, sports facilities, public toilets and community schemes.

For Birmingham the tragedy is most pronounced, as the cradle of modern local government – where Joseph Chamberlain put into action the “Civic Gospel” of improvement that helped define the Victorian age.

As the city’s Liberal mayor, he pioneered the building of municipal swimming pools and schools, and used corporation funds to buy the town’s gas and waterworks.

After Birmingham’s financial implosion, Rishi Sunak sought to pin blame on the council’s Labour leadership. The local party isn’t without fault, to say the least. But context also matters: for every Labour-run authority in dire straits, there is at least another Tory or Liberal Democrat one in a similar predicament.

Michael Gove, who as levelling up secretary is in charge of local government, should know better than most. Surrey Heath borough council, in his constituency, is close to effective bankruptcy, while six of its near-neighbours were on a Moody’s watchlist published earlier this month.

The mess in this leafy London commuter belt should have more Tories worried. The party dominates here in parliamentary elections, but several councils have fallen from its control after racking up vast debts – including Spelthorne, in former chancellor’s Kwasi Kwarteng’s seat, and Windsor and Maidenhead, in Theresa May’s.

The wider economic context matters, too. To offset austerity-era cuts, many councils took on their debts while borrowing was cheap in the period of low interest rates after the 2008 financial crisis. The money went into schemes to generate financial returns to plug gaping budget shortfalls, or into town centre regeneration. Projects meeting both criteria were prized most.

However, they were often on to a losing bet. Town centres have been drained of life in recent years by the rise of online shopping, as well as benefit cuts and sluggish wage growth sapping consumer spending power. The Covid pandemic then turbocharged these trends, leaving any council that had been acting as a buyer of last resort in a deeper mess.

Even for authorities that steered clear of the property market, the cost of providing services has ballooned as Britain grapples with the highest inflation in the G7, while the cost of living crisis leads more households to need their help. Deep divisions in economic prosperity between Britain’s richest and poorest areas also make it a tougher crisis to fix.

Urgent solutions are clearly required. Aiming to plot a way forward, a forthcoming report from the Fabian Society thinktank recommends greater devolution of tax and spending powers to local communities. It’s a tough sell when so many councils are going bust. But it is not without merit.

England is one of the most centralised nations of its size in the developed world, with central government involved in almost every aspect of how councils operate. As much as 95p in every £1 of tax raised goes to the Treasury, which then decides on how best to reallocate money to local areas – often grudgingly.

Greater devolution could help sidestep the postcode lotteries and council bidding wars witnessed with Boris Johnson’s centralised pots of levelling up money, which were often spent on pork barrel schemes in Tory target seats anyway.

However, any increase in local power will require serious efforts to bolster local governance structures to prevent future town hall financial scandals.

The case for reform is overwhelming. Voters will not thank any party, locally or in national government, for the steady demise of the most visible aspects of the public realm: town centres, public buildings, parks, streets and services. It’s about time local government did stuff once again.