Bailout councils, not big business

9 May 2020

 

The first signs of a catastrophic economic collapse are being seen across the news as we head into May. Putting millions of staff at risk, and risking £50bn a year of vital investment in the economy at a time where business has never been tougher in the industry.

 

But these aren't high street shops or restaurant chains, these are local councils. 

 

On the frontline of the Coronavirus crisis, councils across the country have invested millions into supporting residents in need. From supplying food parcels and housing the homeless to providing social care, all without the income from investments like car parks and leisure centres that councils have grown to rely on as central government withdraws grant funding.

 

The Government has promised £3.2 billion in funding to help councils cover the costs. £3.2 billion is barely a drop in the ocean compared to the real bill.

 

An analysis of the financial returns compiled by 44 of England’s largest councils shows that by the end of this financial year they will be in the red by £2.2bn. And if losses of income and higher than average rates of expenditure continue as predicted that figure could hit £8bn.

 

This is already having a devastating effect on the fight against coronavirus. Five councils have already implemented social care ’easements’ that allow them to lower the standards of social care they provide in order to cope with increased demands and decreasing resources.

 

Liverpool City Council, previously plunged into a financial black hole under the Thatcher government, faces bankruptcy once again as £44m of their £78m coronavirus related costs and financial losses aren't being covered by the central government scheme. Since 2010 the council has lost £436m in central government funding.

 

Despite making tens of millions of pounds in cuts to budgets and services in recent years to try and save their vital reserves, they face being left with just £17m in reserves by the shortfall.

 

And Coronavirus is only the start of it.

 

Councils have been facing this crisis for some time. With the increased range of services, they're expected to fund from their own pockets crashing hard into central government funding cuts and a new government emphasis on self-sustaining councils that don't come with the finance options to fund the investments hailed as their saviour.

 

Worse still, with business rates set to become a larger part of council budgets than ever, councils across the country invested heavily in retail and leisure units to promote business in their areas - which leave them out of pocket for bricks and mortar in markets now facing collapse. As the coronavirus marks another nail in high street retail’s coffin, many councils will be left with investments in the future that cost them vital services in the present.

 

We can't even begin to consider bailing out big brands - from Virgin Atlantic to P&O owners DP World - before we bail out councils. And push for reforms to council financing to make sure they’re never allowed to fall into this state of desperation again.

 

Councils across the country supply us with vital services we cannot live without. The glue that holds society together, they dispose of our waste, light our streets, provide safe housing for those in need and deliver vital support services for tackling some of society's biggest hidden crisis points, from mental health to substance abuse.

 

It is no exaggeration to suggest that millions of lives hinge on council service provisions - from families fleeing domestic abuse to young people gaining sanctuary and opportunities from youth centres to escape a life of crime and the school to prison pipeline.

 

The reality is, every cut we make to vital council services will eventually cost more than we save. In lives, in increased social care costs, in increased later life education budgets needed to make up for the consequences of underfunded schools and even in crisis payments for people who could have been saved from homelessness by social housing.

 

It is not enough to simply bail councils out. We must ensure that their unsustainable funding structure is overhauled. Councils shouldn't have to invest in football stadiums in the hope that they'll fund social care in the future. They shouldn't be having to cut vital community lifelines, from homelessness provisions to libraries and community spaces.

 

It’s time for a council funding model measured in need, not by numbers, where councils dealing with higher levels of deprivation are provided with more than just funding to treat the social symptoms of deprivation. Councils must be given the freedom and funding to invest in tackling it at the source. If councils must borrow to fund services, let them invest in infrastructure, training and environmental improvements that will help lower the costs.

 

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