Why Local Governments are Going Bankrupt
This week on the podcast we look at the case of Croydon Borough Council and their failure to provide a suitable property to Ms. Imam, a disabled woman with three children who was homeless through no fault of her own.
The whole saga had been going on since 2014 and only reached the Supreme Court very recently. In fact, spoiler alert, the case was remitted back to the High Court where new evidence will have to be considered.
Such an abject failure to assist the most vulnerable in the community is shameful but to what extent should we blame Croydon Borough Council?
They seem like the obvious villain in this story and a lot of the blame does have to fall at their door but their argument (that they do not have the budget to comply with the legal duty) should not be ignored.
In September, Birmingham City Council effectively declared bankruptcy by issuing a section 114 notice. Such a major local authority taking this extreme step sent shockwaves through local governance circles and prompted a lot of questions.
To be sure, there was mismanagement within the council and a big factor was outstanding equal pay claims that dated back to 2012.
Nevertheless, another important point to consider is that the funding of local government from Westminster has seriously declined since the Tories took power in 2010. A report from the Institute for Government estimated that between 2010 and 2022, the spending power of local authorities has declined by 31% across the board. For all the recent talk about ‘levelling up’ this situation is not being rectified any time soon under the stewardship of Michael Gove.
At the same time that local authorities were becoming severely underfunded, pressures have also been mounting in competition for those limited resources. The population is growing despite attempts by the central government to curb immigration, demand for local government services is on the rise, and inflationary pressures mean that councils are getting less bang for their buck.
All of this is creating a perfect storm. Birmingham is not an exception, it is the canary in the coal mine.
Croydon issued its own section 114 notice in 2020 but Woking, Slough, and Nottingham are other recent, prominent examples. Central government can intervene and budgets can be amended but the sheer number of councils that find themselves in trouble demonstrates that this is a systemic problem that extends beyond mere mismanagement at a local level.
A number of councils like Coventry, Middlesbrough and Hastings have raised concerns that they too are on the verge of issuing section 114 notices.
When things go wrong it is often very easy to blame local authorities but to really understand the problem it is worth looking at who is pulling the purse strings.
Episode link: https://uklawweekly.com/2023-uksc-45/
Happy New Year!
Marcus