Since 2022, five separate councils including Birmingham, Nottingham, Woking, Thurrock, and Croydon have declared bankruptcy. This is unprecedented; between 2001 to 2018 not a single council went bankrupt. Today a fifth of council leaders say they may follow suit.
Why has this crisis emerged?
Firstly, costs of key services are spiralling. Councils are tasked with providing for the most vulnerable, the demand for which has risen in tandem with skyrocketing poverty.
The government has responded by increasing the role of the private sector in providing essential services, such as care for the elderly and children.
Yet the government’s own analysis on children in care services concludes: “Profits of the largest providers are materially higher than we would expect them to be if this market were working well”.
In other words these vultures use their monopoly position to profiteer off the most vulnerable children in society and expect the working class to pay for it.
This is precisely how the market ‘works well’ – to channel funds into the pockets of the rich!
Shortfall
Secondly, funding has been slashed. Between 2010-2020 central government grants fell by 40% in real terms. Even with tax hikes, spending power remains 17.5% less than when the Tories took power.
On 24 January the government announced a £600m increase in funding for local authorities. But this is only a fraction of the £4bn shortfall that even the government estimates is needed for the next two years alone.
Meanwhile, £4bn a year of council budgets is handed straight to the banks in the form of interest payments on debt.
Mismanagement
Mismanagement is also a factor.
Woking council went bust after throwing over £700m at a high-rise hotel development. Thurrock council gambled hundreds of millions of pounds on risky commercial investments. And Birmingham went broke after the unions brought them to court for underpaying female workers £1.1bn over a decade.
Such mistakes are amplified by the amount of staff that have been cut, and the relentless pressure to find ‘alternative’ sources of income to plug the gaps left by austerity.
When interviewing one Birmingham Labour councillor we asked how no one saw this disaster coming? “There’s so few staff left, everyone is pushed to the limit, no one knows what is happening. We were blindsided”.
Such is the scale of the crisis, however, that even ‘well run’ councils are facing bankruptcy.
Democracy denied
Once a council hands in its section 114 (bankruptcy) notice things go from bad to worse. If Whitehall wishes, they can completely suspend local democracy and instead appoint commissioners to take over the council.
These commissioners are tasked with ‘restoring public finances’ and are accountable to no one. Local councillors are turned into rubber stamps for these unelected bureaucrats, who are paid the handsome sum of £1,000 a day.
In Birmingham, this means £300m of cuts, including 600 jobs, and hiking council tax by 21%.
Dented shield?
This crisis is the logical outcome of over a decade of austerity by the Tories and the complete failure of the so-called ‘dented shield’ approach employed by Labour i.e. managed cuts.
One councillor, when asked what Starmer will do to save the day, said: “Nothing yet! You know the money’s got to come from somewhere.”
This is true. The money ultimately has to come from either the capitalist class or the working class. And so long as the capitalists are in the saddle, it’s of course workers who are made to pay with mass job losses, eye watering taxes, and slashed services.
Starmer has nothing to offer the working class other than more attacks and austerity. We need a communist alternative to the complete failure of Labour’s ‘dented shield’.
The very workers that Starmer will be laying off in their thousands are represented by Unison and GMB, who fund the Labour Party! The stage is being set for an almighty showdown.
All unions must therefore unite and mobilise to defend jobs, force out these unelected commissioners, and take matters into their own hands.
Break the law, rather than the poor
The money exists in society to provide excellent services for all, but it is in the hands of the banks and the profiteers.
We say:
- Debt payments to the capitalists must be reneged on. The bankers and billionaires have bled us dry for long enough!
- All council services should be brought back in house, expropriating the profiteers without compensation.
- Asset selling must cease. All privatised council assets should be taken back into local authority ownership, as well as those required to run decent services.
- Every council official should be paid no more than the average wage of a skilled worker.
- Any attempts to circumvent or suspend local democracy should be responded to with the full force of the labour movement.
We will be told that these moves contravene the law. But who does the law defend, the vulnerable and poor, or the private property of the rich? Communists say it’s better to break the law than break the poor.
A communist programme is the only fighting alternative to the brutal cuts and misery on offer. The need to build the Revolutionary Communist Party is clear.
No job losses. No tax rises on workers. No cuts to services. Make the bosses pay!
