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Editorial Labour is right to demand a new settlement for council funding

BIRMINGHAM City Council’s bankruptcy is a very big deal, and Keir Starmer is right to draw attention to the risk that we will see crises like this recur across the country.

Birmingham is the biggest local authority in Europe. It is not the first British council to declare bankruptcy, but the scale of the impact on over a million residents should be a wake-up call.

Some councillors have sought to blame the council’s equal pay liability, which stands at over £1 billion. Unions are right to stick to their guns in defending their achievement in winning compensation for years of pay discrimination for women workers. Of course with money running out, any large liability can tip things over the edge, but this is not the root of Birmingham’s problem.

Nor can we lay all the blame at poor spending decisions by Birmingham councillors. For once Labour is clear about the cause, and even hints at redress. “For 13 years, local authorities have been stripped of the funding they need. So we will have to look at that again,” Starmer says.

That the Tories have crashed the economy through 13 years of bad decisions is a standard Labour charge. Hinting that Labour might actually raise spending to repair the damage is almost unheard of from the Starmer team and is an opening which should be prised wider by concerted pressure from unions, local authorities and community campaign groups. 

“Local government” is not a concept that inspires passion as can the NHS. It can be hard to mobilise a defence of its funding. 

Its relatively greater autonomy over spending than revenue-raising means specific cuts are often a choice even where cuts overall are forced on a council, so councillors, rather than Britain-wide budget cuts, get the blame. 

It is often easy to point to examples of waste, outsized pay packets for council leaders, even blatant corruption in local government, muddying the water further.

This context emboldened the wrecking-ball government of David Cameron and George Osborne to slash council budgets more severely than any other area of the public sector — reducing their central government funding by a staggering 40 per cent.

The same political logic played out in Scotland, where SNP administrations between 2013 and 2019 cut local government budgets by more than three times as much as the Scottish budget was cut by Westminster.

These savage cuts are the reason Britain lost over 800 libraries — a fifth of the total — in the first decade of Tory rule and have contributed too to the closure of 400 swimming pools.

Councils have to carry out their statutory duties. With an ageing society, some, like social care — where promised sector-wide reform has been quietly ditched by Rishi Sunak — will keep rising in cost, even as cash-strapped authorities make “savings” by outsourcing work to unscrupulous employers cutting corners on service and workers’ rights.

Starmer should be held to his call for a new funding settlement. Britain’s over-centralised state leaves councils with almost no revenue-raising powers, with a higher proportion of tax collected by central government than in any other G7 country. Financial reform is key to democratising local government and addressing its character as a mere conveyor belt passing on cuts.

Funds must be freed up for reversing the cuts to local services of the last 13 years, and Labour confronted with the reality that this means clawing back the super-profits of the corporations and taxing the assets of the super rich, things it currently rules out.

And the links between this crisis and those across the public sector must be recognised. Struggling councils put pressure on a struggling NHS and vice versa. 

Austerity has critically undermined the British state’s ability to deliver services at a level the public rightly expect: no government maintaining a chokehold on public spending will be able to improve them.

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