Published On: 27th March 2024Categories: General
Photo: Socialist Party/Militant

There is a spectre haunting the Town Halls of Britain, the spectre of bankruptcy. Local councils are going bust, or are teetering on the edge of a financial precipice. Paul Heron, the Legal Director at the Public Interest Law Centre, examines the problems that face councils, and asks is there anything that can be done?

On 5 March 2024 Councillors at Birmingham City Council sanctioned the most extensive budget cuts in the history of local government. The measures entail the elimination of approximately 600 council jobs, the ending of arts grants, closure of libraries, and the reduction of bin collections to once every two weeks. Furthermore, the approved cuts include reductions in funding for adult social care, children’s services, flood defences, and highway maintenance. Additionally, street lighting throughout the city will be dimmed. The council, has also endorsed a 10% increase in council tax for the upcoming financial year. This decision follows the council’s declaration of effective bankruptcy in September 2023, with the government granting special permission to exceed the national cap on tax rates.

From Birmingham to Northamptonshire, Croydon, Slough and Thurrock, the list of bankrupt councils goes on. Indeed as has already been noted, “One in 10 county councils in England is facing effective bankruptcy – putting vital services at risk, local government leaders have warned.”

From libraries, to youth clubs, from care homes to other essential services, austerity measures have served as the final blow to these social lifelines. Let us make it clear these are Central Government cuts to local government finances, however local Councillors sit on their hands and do nothing.

In 2018 the Public Interest Law Centre (PILC) through judicial action stopped the forced sale of Southall Town Hall by Ealing Council. .The old Southall Town Hall was the home of many charities and community groups. Had the sale gone through, charities housed there would have been homeless. Without a base, many of these vital community groups would have ceased to exist. According to Ealing Council Councillors the sale was necessary to ‘plug the gap’ in the cuts expected in the Council’s finances. Campaigners were told ‘there was no alternative’. Since the successful judicial review action the council have not re-visited the decision, and the sale was effectively stopped. There is now a healthy and vibrant Southall Community Alliance who supported the case all the way through, and have no intention of these proposals returning.  In Folkestone, Kent, we helped the community secure the future of their local library and hold the local authority to account over their austerity-backed closure and lack of repairs.  This case demonstrates how councils cut without consultation.

Cuts, cuts, cuts…

Local councils have been the frontline instruments to pass on austerity cuts for the past decade and more. No other area of government has been subject to the same financial squeeze. In July 2023 the London Government Association estimated that English councils faced funding gaps of £2bn in 2023-24 and £900m in 2024-25. It has since revised those figures in the light of Bank of England inflation forecasts to £2.4bn and £1.6bn respectively.

You don’t need to be a financial genius to understand how we arrived at this point. The funding allocated to councils by the Central Government experienced a substantial real-terms reduction of 40% from 2010 to 2020. Further and even sharper cuts are on the way.

There is no doubt that local councils are caught in a whirlwind of cuts and financial constraints. Sadly, elected councillors are doing nothing to stop this happening. They are merely voting to pass the cuts. This is not only an abdication of duty, but an act of political cowardice.

What should local Councillors do?

Local councils retain enormous powers and responsibility.  Councils in England control budgets totalling £120 billion – providing services from housing to schools, youth provision, adult social care, libraries, museums, crime reduction, local welfare assistance, sports centres, parks, transport, highways maintenance, recycling and refuse collection, and have legal powers over many non-council provided services.

Local councils are in a powerful position to fight back. It is just not true, as the majority of Councillors try to suggest, that they are powerless to act.

Local councils are facing major cuts from Central Government. However, there is room to manoeuvre. The Localism Act 2011 provides local councils with an inherent power of competence [to do] anything apart from that which is specifically prohibited. As a matter of law this allows Councillors to act against making cuts.

As a start, local Councillors who are prepared to resist austerity can use their own reserves and ‘prudential borrowing’ powers to avoid passing on government cuts. Such a step needs to be linked to empowering the community, building campaigns against cuts and crucially linking with the wider movement. A mass campaign of opposition to Central Government cuts has to be built. Such a strategy is completely within a council’s legal powers.

Council finance officers can challenge a budget they believe to be ‘knowingly unbalanced’. In other words, a no cuts budget, but it is not unlawful to set such a budget if it can be balanced in other ways.

Thus, the use of reserves to meet projected deficits and finance debt repayments is legally a ‘matter of judgement’ for Councillors themselves to make. As The Times reports, local authorities were ‘sitting on £21.8 billion of non-ringfenced reserves last year, £5 billion more than they had in 2017 and £11 billion more than they had at the start of the decade’.

I would accept that councils using reserves and selective borrowing to avoid making cuts would only be buying time. There is an inevitable showdown to be had with Central Government at some point. There is after all no ‘clever tactic’ or legal principle that can avoid the need to build a mass campaign against the cuts.

Any legal tactic therefore needs to be linked to a campaigning strategy. Thus, the best way for Councillors to contribute to the mobilisation of a mass campaign, necessary to defeat the cuts and campaign against Central Government, is to argue for budgets that meet the needs of their local communities, without massive council tax hikes. They should call for councils to join together to demand that the government makes up the funding shortfall. Such a deficit budget or no cuts budget clearly highlights what is needed, and exposes government cuts. This is not a new tactic.

Councillors – fighting cuts

In 1984 the council in Liverpool employed the tactic of a ‘needs budget / no cuts budget’  to great effect. Indeed, they forced the then Central Government to concede extra resources to the city worth up to £60 million (£98 million today).

However, there is, of course, no guarantee of victory – but if there is no fight, there will be no win.

It is important to pause here and acknowledge that the law has changed since the 1980s. The Local Government Act 2000 abolished the power to surcharge Councillors (that is to fine Councillors). So whereas Councillors in Liverpool and Lambeth councils faced surcharge in the 1980’s, this is no longer a weapon that can legally be used. There is therefore no reason why Councillors can’t act now.

The advent of ‘localism’ under the Localism Act sought to place councils in control. Thus powers were restored to local councils by Central Government and there is more flexibility for Councillors to act.

The state’s reserve powers to appoint commissioners to take over particular council functions remain, although only after a legal process – which in itself could also be challenged both in and outside the Court. Central Government moving against a local council and deploying commissioners to take over would be difficult – particularly if there was wide support in the community for an anti-cuts budget. That would be even more problematic if several councils take the ‘Liverpool road’ simultaneously and are backed by a mass campaign.

What if Councillors fail to act and continue to make cuts?

The attitude of the Councillors in Birmingham and all the councils who have faced financial meltdown is to pass on Central Government cuts. They don’t want to act to stop cuts. What legal remedies are there?

There is still the possibility of bringing selective legal challenges to stop cuts. The first option is to challenge any proposed cuts that impact on a service or duty that the Council has a statutory duty to deliver. The second are services that are provided as part of a public service which are not pinned to a statutory duty. Such duties such as youth services or libraries that are cut or closed, these can also be subject to a public law legal challenge and a Judicial Review.

If you require further information contact our Public Law team on 0203 559 6342 or at office@pilc.org.uk