Bankrupt Britain: how councils go bust

22 April 2024

By Jeremy Dewar

Over 1,000 job cuts were announced in early March by Nottingham and Birmingham city councils, with the promise of the same next year. Although there are variations, all non-statutory services will be hit.

Residents face above-inflation council tax hikes of 5% in Nottingham and an unbelievable 21% over two years in Birmingham.

Both local authorities issued a 114 notice in 2023, which signals that a council cannot deliver a balanced budget and effectively hands over control of the council to a government appointee and its senior officers. They are only two of a total of eight councils to have done so in the past 18 months, before which only six councils had issued Section 114 notices since their introduction in 1998.

In Nottingham a government appointed ‘improvement board’ shadowed the council for seven months before handing over responsibility for writing the budget to senior management. The resultant budget slashed £53m of services, including the last two surviving youth clubs, all remaining community centres and is even considering charging homeless people for using public toilets. Five hundred jobs are on the line.

The Labour councillors, who are in a majority, put up a fight. This was mostly verbal, acknowledging the Tory government’s hand in making the cuts and in making it illegal to vote against them. Their amendments to demand a review of local authority funding from the central government and to lessen the cuts by taking money out of the reserves were far from adequate but, to add insult to injury, they were ruled out of order anyway.

One Labour councillor, Sheriff of Nottingham (ceremonial mayor) Shuguftah Quddoos, voted against the budget. She was duly suspended from the party. Indeed council leader David Mellen revealed that Keir Starmer’s office had warned him that all councillors voting against the cuts would be ‘thrown out’.

Birmingham is widely known as Europe’s biggest local authority and therefore the cuts are on a far larger scale: £149m spending cuts; 600 job losses; and a 10% council tax rise. But this was the council’s own budget and all the Labour councillors voted for it—an utter disgrace.

Social care and children’s services, parks and libraries all slashed, while arts grants will be scrapped. Like Nottingham, the £1.25bn government ‘bailout’ to Birmingham city is in fact a loan, to be paid back by future generations.

Funding gap

Is this all down to ‘poorly run councils’ as Michael Gove and Rishi Sunak would have it? Certainly Birmingham’s £873m bill for systematically underpaying female workers is entirely of their doing and the money should be paid now. Investment decisions, like Nottingham’s failed Robin Hood energy company, Birmingham’s expensive and error-strewn IT upgrade or Woking’s spectacularly disastrous financial speculations played their part too.

But they did not cause the crisis. Austerity did. Since the last year of the Labour government in 2009, Treasury funding for local councils has fallen by more than 40% in real terms. Local councils were the hardest hit of all by coalition chancellor George Osborne and his Tory successors.

This was not helped in 2015 when the newly elected Labour leader Jeremy Corbyn, along with supposed leftists John McDonnell and Jon Trickett, sent a circular to all Labour councillors and local parties, instructing them not to break the law and set only legal, austerity budgets.

Neither Momentum nor anyone else defied this betrayal, which led to spineless left Labour councillors agreeing to cuts after cuts. From Poplar in the 1920s to Lambeth and Liverpool in the 1980s, left Labour councils had defied the Tories in Westminster. Corbyn refused to fight.

Because councils are legally obliged to provide certain key services, like social care, schools, housing and waste collection, which swallow the majority of the budget (social care alone accounts for 70%), the cuts fell on a few departments, hitting women and young people the most. While councils have sold 75,000 public assets such as libraries, swimming pools and community centres—worth £15 billion—since 2010 and contracted out as much of their labour force as they could to stave off the crisis, reckoning day was sure to come.

It was the pandemic in 2020–22 and double-digit inflation in 2022–23 that has pushed many close to, if not actually over the edge. Covid not only stretched council budgets but long covid and other chronic illnesses flourished in its aftermath, leading to a massive increase in health and social care needs. Hot on the heels of the pandemic, the cost of living crisis has massively increased homelessness as soaring rents, food and energy price rises caused evictions and a further strain on budgets.

We face the perfect storm: falling revenue, rising need and a rigid straightjacket that constrains councils’ legal options. According to the Local Government Association (LGA) one-fifth of all councils expect to go under in the next 12 months—and a fair few of them are Tory administrations.

The LGA has estimated that a £4bn funding shortfall will open up over the next two years. Levelling Up minister Michael Gove responded with a paltry £600m; the lion’s share is for social care, but even here it will not plug the gap.


Asked on Sky News on 10 March whether she would bail out ‘bankrupt’ councils, Shadow Chancellor Rachel Reeves replied:

‘My focus is on reforming the planning system to get Britain building again… If we do those things, we will bring in the tax revenue and we will be able to invest in public services again. There’s no shortcuts. That is the way.’ In other words, with the economy flatlining, councils will go bust, jobs and services will be slashed and lives ruined.

Union leaders—mainly Unison, GMB and Unite—offer little more. They sat on their hands for 15 years, while jobs, pay and services were destroyed. The GMB has secured an 87% strike vote—but only over their historic equal pay claim, not the cuts. Unite’s national officer for local authorities Clare Keogh issued a statement claiming the union ‘will do everything in its power politically and industrially’ to ensure workers don’t lose their jobs. However we are yet to see any concrete action. Unison has done absolutely nothing.

It is up to the rank and file to organise workplace and council wide cross-union meetings to reject every cut and demand immediate strike ballots. They should also elect strike committees to build for action, make links with community organisations and other council unions facing cuts, 114 notices or not. Fight every cut with strike action and all closures with workplace occupations.

The big three unions are all on the National Joint Council, which negotiates pay; their 2024 pay campaign has just kicked off. Workers must demand that any pay rise is fully funded by the government if they are not to be fobbed off with cries of insolvency or further cuts by cash-strapped councils. If they pull this one—like Royal Mail did last year—unions should demand the government solve this funding crisis by taxing the rich.

Ultimately we need to break with the notion that public services are dependent on capitalist growth, that is the growth of profits. Trickle-down economics doesn’t work—except for the bosses. Services should be driven by need alone, not what the rich say they can ‘afford’.

Community organisations and local rank and file union bodies, while organising to fight the cuts, should form councils of action to discuss local needs, the kind of services that should be provided and how to force the government to provide the necessary funding.

Tags:  • 

Class struggle bulletin

Stay up to date with our weekly newsletter