Councils going bust: Labour government must pay up now!

By a local government worker and UNISON activist

The situation is local government is currently dire. A record 30 local authorities have been saved from financial disaster by the provision of emergency government loans. Seven councils in London have been bailed out, meaning nearly 25% of London town halls would be facing bankruptcy without this bailout. However these bailout packages will not fundamentally solve the deeper problems. The total package of £1.5 billion is enormous in size, but is in reality little more than a short-term sticking plaster on the fractured system of local government.

Last year’s October budget – Labour’s first for 14 years – provided little respite for beleaguered local public services. Despite some increases in funding, these have been widely acknowledged to be completely insufficient.

The funding crisis undoubtedly has its roots in over a decade of Tory austerity and the ideological attacks on the public sector. But it has also been exacerbated by local financial gambles which haven’t paid off. In Wirral for instance, the long-term lease for £4 million per annum of an unneeded and currently empty office block, with hoped profits from sub-letting little more than a fading mirage. In Nottingham, Thurrock and Newham, similar punts on energy schemes have seen similar failures.

These gambles were taken in many areas by councils who, rather than challenging and fighting back against reduced government funding, instead tried to find ways to accommodate and offset it. These were decisions taken by councillors who would rather bet on a financial lottery than engage in political struggle on behalf of their communities.

Reeves’ ‘fiscal rules’ mean devastation for councils

Another significant area of financial pressure has been the increase in demand of adult and children’s social care. This increase was entirely predictable, but councils which are too often wedded to an outsourced private model of care have been at the mercy of unscrupulous providers ramping up prices. This is a model which needs urgently correcting, with the provision of publicly-owned and managed care services.

The government has recently promised changes to how the formula for allocating is used. But this would simply be adding a sticker plaster to a gaping wound. In December 2024, the Local Government Association, alongside the Chartered Institute of Public Finance and Accountancy reported that what councils need is a significant and sustained increase in overall funding in order to stem the emerging risk of system-wide financial failure.

The plans hinted at by Rachel Reeves fall far short of that, and what little she has offered, as with so many other ‘promises’, is based on her own gamble of ‘economic growth’ playing out. However that growth is looking less and less likely as the days go by.

Her self-stated ‘iron grip’ on self-imposed fiscal rules means the financial challenges to local government are likely to increase after her spring financial statement on 26 March.

Unions need a fighting response

This will present a challenge not only for councils up and down the country, but also for public sector unions. UNISON’s General Secretary, Christina McAnea has had a fawning and uncritical approach to Labour. Desiring a break with this fundamentally incorrect approach, the left activist base, under the banner of Time For Real Change, are seeing significant grassroots support from members who have had enough of austerity and pay cuts. They have an excellent opportunity to win both of the elections.

We need to see a much greater challenge and fightback from the unions for increased funding, inflation-beating pay deals, and an end to the privatised, outsourced model of providing social care.