2 July 2020
Murder at the Town Hall
by J.R.Thomas
A few weeks ago the Shaw Sheet ran an article on the New Normal, in which some of us – and you – expressed views as to what brave new world would emerge, blinking, after Covid-19 finally left us. Your resident cynic felt that the New Normal would be much the same as the old normal, only with higher taxation. But there is one area that may well never be the same again, the plague having finally brought to a head clashing crescendo some irreconcilable truths. That area is local government and the whole issue of local democracy in the UK.
What has been somewhat overlooked in the Great Emergency – though not by local councils themselves – is the enormous costs imposed by the lockdown and by remedial measures on district, county, and city councils. The redoubtable Mayor of London, Sadiq Khan, has, it is true, made a great deal of noise about the potential bankruptcy of Transport for London, which continued operating most of its system to a limited extent over the period of the lockdown, whilst earning very little revenue. But as Boris pointed out, Mr Khan largely brought TfL’s troubles on himself by having a fare freeze for the last four years, so causing his revenue shortage to get worse year by year. London Underground in particular had identified an accrued deficit of around £1billion long before the virus struck. And that does not include the enormously over budget and behind time CrossRail. So we won’t feel too sorry for the London Mayor and Assembly – after all, TfL and a bit of high level planning stuff are their only real responsibilities.
It’s not so easy out in councils in the boondoggles*, or indeed in the London boroughs. They have been under financial pressure for years, as the services they provide have got more expensive (not necessarily more extensive), and their revenues have come under ever greater pressure. Just over half of local government income comes from council tax levied in their authority area, about 17% from business rates – the councils collect it from local businesses and send the rest to Whitehall, and the balance of around 30% from central government grants – money Whitehall sends back to town halls. There is also a little revenue charged for services – car parking and permits (usually the big earner), planning fees, swimming pool charges, that sort of thing.
Your local council, you may well be relieved to hear, cannot borrow money, other than from the UK government, which does not like lending it. So town halls have to run a balanced budget and in a bad year the only place they can get more money from is the reserves, if any, built up in previous years. Local government income has fallen by nearly 20% in true terms over the last ten years. And, just to keep the borough treasurers on their toes, central government applies a limit on by how much council tax can be increased, so local tax revenues have stayed more or less in line with inflation whilst central grants have fallen sharply, a trend until recently forecast to continue over the next five years.
Then add to this that councils just are not very good at managing large projects, but like most politicians, are very fond of them. Best example? Edinburgh’s famous, or notorious, tram system , finished three years late at double the budget and with only half the intended network built. It does, Auld Reekie council taxpayers may be pleased to hear, almost break even operationally. Or did, until recent events. There are lots of examples of badly managed capital spending which we will not dwell on (though the affair of my local swimming pool rankles, demolished for a much whizzier version which may not now be built because the costs were so miscalculated), but we will just alight on one bit of fashionable spending which is not working well. Local councils, as we said, cannot borrow, but some have largish reserves. So, here’s a wheeze, to improve council revenues, how about investing the reserves in property? Net rental income will be two or three times higher the revenue of sticking it on deposit with Barclays, and anyway, as everybody knows, fortunes are easily made in property. Much of this went into investments in shopping centres, often local ones in the borough. (In 2019 around a fifth of shopping centres sold went to local authorities.) Nobody seemed to stop to think out why property companies, which after all try to make money from such investments, might be selling. They might be thinking now. Shropshire County Council (for instance) bought the three main shopping centres in Shrewsbury in 2018. The value of those, even pre-Covid, did indeed go one way. The wrong way. In fact, that has been true of almost all shopping centre investments and, post Covid, things are going to be much worse, though at least the mayor and corporations will be able to blame the virus and not themselves.
But local government is not just about money, even if that often dominates conversations. To many people, what their local authority does is a great deal more important than the actions of central government. You may care a little about Brexit or defence, but you probably care a lot more if your bins are not emptied, potholes not repaired, your planning application not determined, schools struggle with leaky roofs, or the high street is filthy.
Councils are providers of many of the essentials of daily life, and at the same time they are, theoretically, responsive to local feelings and needs, by having layers of elected representatives – your jolly local councillors. Parish councils do not do much, but they are a conduit for local feelings and concerns, District and County councils (the division of services and roles varies) are the real providers of service and should at the same time be sensitive to their local electorate. Arguably, there are too many layers of democracy and many voters do not understand what particular local councils do – parish councils, for instance have no power in planning matters, other than expressing a local view. Also, arguably because of the money shortage and the lack of clarity at local levels, there is a tendency for services to be cut back in ways that local people might not want. Especially those whose bins are emptied fortnightly in hot summers. Or who object to yet more hikes in parking charges. Or who lose their local swimming pool and see no replacement.
This tension, of lack of understanding as to who does what, and much more, where the money comes from, has been bubbling away for years, as costs increase and revenues decline. The gap was starting to show even before the present emergency – Northamptonshire County Council (Conservative controlled) ran out of money in early 2018 and had to be bailed out, and others were heading the same way. Now, it is estimated that more than three quarters of councils will be effectively bankrupt (they cannot go legally so) by the end of this financial year. Central government will in the short-term bail them out, but the time has come to look at the effectiveness, the responsiveness, the accountability, and the cost of how we provide local services and how local democracy should work. We will publish various views on this next week – including, if you would join us, yours.
* Remote rural area – more usually known as ‘boondocks’. Boondoggle enjoys similar usage in select rural areas of the UK.
