‘More than a decade of central government-imposed austerity on local councils looks set to continue.’
By Tom Brake, Director of Unlock Democracy
The spending review was perhaps this Labour government’s biggest moment so far. A chance to see its true colours, when despite parlous public finances, government priorities could shine through. If that’s the case, local democracy appears not to be among them. More than a decade of central government-imposed austerity on local councils looks set to continue.
Ministers argue the government is focused on delivering change in the areas voters most care about – principally the NHS, where day-to-day spending will rise the most. The local government settlement looks more akin to a sticking plaster, with additional spending powers for councils linked to rising council tax bills. Describing the spending review, Sky News’ Ed Conway spoke of “marginal change”. But marginal change, after years of local government decay, risks looking like continuity. The consequences, for party and public alike, could be profound.
Several councils have already gone bankrupt and dozens more face serious financial stress that won’t be changed by the spending review.
Since 2010, cuts in central government funding have forced councils to rely more on local revenue sources such as council tax and business rates. The problem is that these revenue streams are highly uneven, with poorer areas generating less income. Even with some redistribution, this has widened inequalities between regions, leaving many councils unable to meet basic needs.
Resources for affordable housing programmes and homelessness services cannot keep pace with demand, driving up social and economic costs in the long run. Meanwhile, adult social care consumes an ever-larger share of local budgets, crowding out spending on areas vital for future prosperity. Decaying infrastructure and inadequate housing are stifling local economic growth.
On this, ministers will point to the £500m in capital investment set aside for mayors to fund “innovation clusters”, or the billions signed off for various transport projects to boost growth outside London. The government also maintains it can still meet its target of building 1.5 million homes by the end of this parliament, having allocated £39 billion in grants for affordable housing, albeit over ten years. The issue for Labour is these investments may take a decade or more to bear fruit, well after the next general election. In the absence of tangible improvements in the here and now, struggling local communities may not share the chancellor’s long view.
Local councils are on the front lines of public perception. For many people, local government services are their primary experience of the state in action – or should that be state inaction. When potholes aren’t filled, rubbish piles up, or social care deteriorates, people notice.
Labour MPs may look to the coalition years for sources of hope – the Conservatives, after all, were not punished by the electorate in 2015 for their swingeing cuts to local government.
This would be a mistake, for three reasons. First, by 2015 it could be argued the full cost of austerity had not yet bitten. We’re now a decade further on, and the condition of local government has only got worse. Second, it was the other coalition partner, the Liberal Democrats, rather than the Conservatives, that bore the brunt of voters’ discontent. Labour has no such safety net. Third, and most pertinently, voters had different expectations of the 2015 government. The Conservatives under David Cameron had made their intentions clear: a reduced state, with significant cuts the order of the day – even if their scale still took some people aback. By contrast, voters punished the Liberal Democrats because they were seen, fairly or unfairly, to have betrayed their promises. It’s clear in which camp Labour sits in 2025. A government elected on a platform of change, striving to ensure “renewal is felt in people’s everyday lives”, cannot afford to oversee collapsing local services.
Sympathetic observers would say that circumstances have forced the government’s hand. That the crisis in local government has been decades in the making, and that Rachel Reeves, as chancellor, is playing as best she can with the cards dealt by a dire economic inheritance. George Osborne, the architect of Conservative austerity in the first half of the 2010s, was ideologically committed to a sizable shrinking of the state. No-one can think that of Reeves after this week.
In the end, though, Labour’s agonising will count for little. If a councillor emerged from a ten-year coma tomorrow, they’d be forgiven for not noticing there’s been a change of government. Labour no doubt believes voters will take a different view by 2029. But by failing to reverse years of local government neglect, ministers are gambling with their, and the country’s future.
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