Scandal of the councils that are billions in debt, it’s the crisis that no one talks about
Don’t you hate it when the bills start rolling in, each one dropping on to the doormat like a silent reproach, a reality check?
Oh, well, you think, perhaps we can scale back the holiday plans. Then the unexpected one lands, the one you had forgotten about, the “pay nothing for three months” self-indulgent treat.
Before you know it, you’re shouting: “Okay, it’s Bognor this year – just get used to it” (and ignoring the cries of “Bugger Bognor”).
Whoever wins the political charade on July 4 will find themselves picking up the Bognor bill.
They already know, of course, that there’s no money. And they are braced for the most obvious of the crises and scandals they will have to tackle.
In no particular order, these are: Water companies pouring filth into our rivers; the fallout from the shameful postmasters affair; the lack of credible defence for our nation in the face of growing aggression by Russia, China and Iran; the influx of costly illegal immigrants; the shambolic National Health Service and – separate problem – junior doctors holding patients to ransom with their strikes over pay.
However, there’s another, a scandal that has disappeared off the radar but is set to send shockwaves through the new Government. I’m talking about bankrupt councils.
Birmingham City Council declared itself broke last September by issuing a Section 114 notice, which is just a formal admission that it does not have the money to meet its budget commitments.
It is the biggest council to have done so. The crisis started with Northamptonshire in 2018, the first local authority to go bust for 20 years. Others followed: Woking, Croydon, Thurrock, Slough and Nottingham.
In the wake of Birmingham’s failure, the credit agency Moody’s warned that several other local authorities were poised to follow suit and revealed the huge sums owed by England’s 20 most indebted councils.
Top of the list is Spelthorne Borough Council in Surrey, which owes £1.1 billion – that’s almost 87 times what it brings in from council tax, parking fines and the rest.
How did it come to this? Incompetence, hubris, bad luck, Covid, inflation and the Government’s austerity measures all contributed.
Labour-run Birmingham, the largest local authority in Europe, was hit with a bill that rose to £760 million after women workers took the council to court over an equal pay dispute and won.
The council created the mess by favouring men in a bonus scheme they introduced, then ignoring the legal fall-out. Now they have had to halt spending on everything but statutory services and protecting vulnerable people.
Woking is £1.2 billion in debt – 107 times what it raises in council tax each year – after chancing its arm in the commercial property market. It built skyscrapers in the town centre, including a Hilton Hotel, as well as public plazas, shops and car parks.
It borrowed heavily and was caught with its trousers down when inflation gripped and interest rates rose. The council’s book-keeping was hopeless and financial controls were weak.
There is no doubt the funding system – like most of our systems – is broken. In February, local authorities were told they would get £64.7 billion for the current financial year. This included £600 million doled out by Housing Secretary Michael Gove to struggling councils.
The Local Government Association reckons councils in England face a £4 billion funding gap over the next two years. Everyone is looking to the Government to plug it. It has helped a little – but nowhere near enough to bail out those drowning in debt.
And Shadow Chancellor Rachel Reeves has made it plain she will not come to the rescue. “I am under no illusions about the scale of the challenge that I will inherit if I become chancellor later this year and I need to be honest with people,” she said.
But there is more to it than a spending squeeze. There is a corrosive culture at work. Councils have come to think of themselves as corporations rather than as public servants with a responsibility to spend their taxpayers’ money wisely.
And no one has been properly scrutinising their spending since David Cameron scrapped the Audit Commission in his “bonfire of the quangos”.
If you want to see how grandiose thinking turns into a financial nightmare, then take a look at the books of the South London Borough of Lambeth. The Times did and last week it printed a shocking exposé of how fat cats are creaming off huge salaries from council tax while pursuing crackpot green policies and leaving tenants in squalid social housing.
The Labour-run authority, which owes almost £1 billion, has spent £25 million on climate and travel initiatives, such as low traffic neighbourhoods and cycle lanes in a bid to reach net zero by 2030 – 20 years sooner than the national target.
It has 40 staff on more than £100,000 a year, including the Chief Executive Bayo Dosunmu, who pulls in £187,775 (that’s £20,000 more than the Prime Minister).
Director of Climate and Inclusive Growth, Nabeel Khan, gets £160,334. He used to work for London’s spendthrift Mayor Sadiq Khan as head of economic development.
Meanwhile, Lambeth is in the bottom 10 per cent in the country for delivering adult social care; its children’s services need improvement on every measure; the Housing Secretary has written to the council four times in two years to demand improvement in housing services; it has some of the worst roads in the country; and it has had more complaints upheld by the local government ombudsman than any other authority except Croydon.
It set up a development company called Homes for Lambeth. The council lent it £79.5m but only 65 affordable homes were started in five years. In the same period staff costs were £10.5 million. The chief executive, Jitinder Takhar, was on £217,000 a year.
One pound in every £6.50 that Lambeth spends goes on servicing its debt. This is not bad luck but bad governance. Councils are working on the same principle as the banks did in 2008: You’ve got to help us out because we’re too big to fail.
Liberal Democrat Anne Marie Barker, who in 2022 took over as leader of Woking Council, said the council “had got used to living beyond its means”. It needed a reset on how it conducted itself, she added.
Too true. These are not corporations. They’re not entrepreneurs, they don’t manufacture anything for profit. They are not experts in financial or property markets. They have no money except what they can raise in council tax.
That is our money and these reckless councils are using it to gamble on follies, or pursue daft ideological goals, or pay themselves a king’s ransom. It is verging on corruption.
*****
What a tortured man is Evening Standard Editor Dylan Jones. He was beaten by his father and left to endure the brutality alone when his mother would run off to stay with one of her lesbian lovers. The ordeal gave him a stammer.
Then, at 17, he was raped by a drinking companion. I know these awful, intimate details of his young life because he told them to the world in a memoir, These Foolish Things.
Jones, 64, spoke to Hadley Freeman of the Sunday Times about the book and about his newspaper which, bruised by losses of £84.5 million in six years, is soon to go from a daily to a weekly.
Freeman could not conceal her annoyance that, at a meeting just two weeks ago, he gave her a load of flannel about the decline of local newspapers. “You say they’re declining, but I’m having a great time,” he told her.
Then it emerged that plans to change the identity of London’s only daily newspaper were being worked on even before he was recruited by its owner, Russian-born billionaire Lord (Evgeny) Lebedev, to be its Editor.
Jones is a magazine man – he edited Arena and GQ – and seems to have limited grasp of what news is and how to present it. He is the latest in a line of odd appointments as Editor, including ex-Chancellor George Osborne and David Cameron’s sister-in-law Emily Sheffield.
We don’t yet know the details of the plan for the Standard but, as a weekly concentrating on analysing the news for London, it is likely that it will come out at the weekend. It is also virtually certain that it will be online. No one is reading the print version now, so why would they bother when there are no commuters to pick it up?
The question is: How will Jones and his crew display it? I read the Standard and I like the way it is presented on our screens as a finished newspaper, spread by spread, with a separate space for breaking news.
Newspaper design didn’t come about accidentally; it has been constantly refined to reflect excitement and urgency, or imperatives such as news priorities. The Times online has stuck to that format. I hope the Standard does, too.
*****
Once every four or five years, I and my fellow codgers get to be king makers.
We suddenly emerge blinking from the obscurity of retirement and become relevant again. The politicians want our votes, you see – and they are prepared to pay for them.
The Tories have slapped a so-called triple-lock on State pensions to protect us from inflation. Now they are pledging that pensioners will not be caught in a tax trap as the amount they receive rises.
They have forced Labour to deny that they are planning a raid on pension pots such as the one that Gordon Brown carried out in 1997 when Labour got in.
I must say I’m enjoying this. It’s a power trip. I know it will end on July 5 and we old-timers will become invisible again.
But in the meantime, whom to vote for? Eeny, Meeny, Miney, Moe…
*****
Just Fancy That: Evening Standard drama critic Milton Shulman was one of four Jewish reviewers employed at around the same time on the Beaverbrook titles – the others being Bernard Levin, Herbert Kretzmer and Robert Muller. They were known as the kosher butchers.
RICHARD DISMORE
4 June 2024
