British local councils are going bankrupt with consequent loss of public services

As if it were not bad enough that wages are not keeping up with inflation, that the cost of living has soared and the NHS is being bled to death by privateers and successive British governments dedicated to medical privatisation, it is now coming more and more to light that local councils are in serious financial trouble and most will be forced to cut back harshly on the services they provide in order to avoid insolvency.

A poll in November 2022 of local authorities found that 4 out of 5 feared that they faced imminent insolvency, and some have already gone under:

Thurrock council’s spending will exceed its income by nearly £500 million this year, thanks to a series of disastrous investments that have plunged the borough into effective bankruptcy” reported Andrew Ellson of The Times on 10 February 2023 (‘Second revolt stirs in Thurrock as taxes rise for huge council debts’).

A similar story has emerged regarding Croydon Council which has been in trouble for a while: it has debts of £1.6 billion!

In 2021 the Labour-controlled Slough Council declared itself effectively bankrupt after the discovery of a ‘catastrophic’ £100m black hole in its budget, following closely on the heels of Northamptonshire who declared itself insolvent in February 2018, having projected that without help there would be a £69m black hole opening up in its budgets by 2021.

Vital services (which ratepayers will have believed they have in fact paid for via their steep Council Tax payments) are going to ‘have’ to be cut (assuming there will be no substantial government bail-outs), as disclosed by the November 2022 survey of local authorities:

The survey revealed that two-thirds of the Councils say that it’s ‘likely or very likely’ that they will pause or cancel some economic growth and major road projects as well as routine road maintenance.

Most said that it is ‘likely or very likely’ that they will need to tighten eligibility for adults social care services and reduce reablement and community-based adult social care services.

“Nearly two-thirds said they would scale back school transport services, and nearly a half said they are ‘likely or very likely’ to have to cut support packages for young people with special educational needs.

“A similar number said that they will need to reduce the number of children’s centres and youth services.

“Bus route subsidies, streetlighting, library provision and recycling centre opening times are also ‘likely or very likely’ to be impacted, for most councils.

“And action on climate change is ‘likely or very likely’ to have to be scaled back” (‘One in five councils believe insolvency can be prevented without additional support from the Government’, Devon County Council News, 11 November 2022).

A substantial part of the losses incurred by, say, Thurrock and Croydon, are attributed with hindsight to ‘financial mismanagement’, which means trying to boost the Council’s finances through resort to risky investments which have in recent times gone belly up. And no doubt local ratepayers will be shocked to find hikes of 15% or more in their Council Tax bills to pay what are essentially their Council’s speculation losses – gambling debts in other words! Nor will they be best pleased to find that the money they provide to fund services is increasingly being used to pay millions of pounds in interest to various financiers instead.  Of course, it is probable that some degree of impropriety has been involved in running up these astronomic shortfalls, but the real question is: why do Councils find it necessary to gamble with their funds; and why do they find it necessary to borrow?  Obviously, it is because they are underfunded and struggling to provide the services that it is their statutory duty to provide.

Part of the reason for this is that, at election time, boasting of never raising Council Tax, or raising it less than other councils, appears to be a vote winner; but the more important reason is that central government is not providing the funding that it ought to provide given the level of services local authorities are required to provide. But of course central government is itself insolvent, forced to borrow heavily to meet its own needs. The more it borrows, the more it is likely at some time to default and therefore the higher the rate of interest it has to agree to pay in order to secure the loans it needs.  Only the bankers win in this scenario. That is capitalism, red in tooth and claw, profiting at the expense of the millions of working people whose living costs are going through the roof while they are increasingly losing out on the services and benefits that used to be supplied – no chance of a Council house, no care in old age unless you pay through the nose, the NHS in crisis, etc.

The government is unable to raise enough money in tax to keep up with its expenses because unless taxes are low no capitalist is easily ready to set up a business here that will pay tax, so the government works on the principle it is better to collect low taxes than none at all. But even so, capitalists find it only too easy to find other countries where they will have to pay even less. This is how the billionaires keep getting richer and richer while the working masses suffer.

And to add insult to injury, the British government is spending billions to fund Nato’s war in Ukraine hoping that some time in the future little Britain will be rewarded for its loyalty to Uncle Sam who is happy to sacrifice the lives and wellbeing of the entire Ukraine people to further its quest for world domination by putting Russia out of action.

Are the British working people mad that they tolerate this situation?

Thurrock, in southern Essex, was the birthplace of the peasants’ revolt more than 600 years ago, when local farmers refused to pay Richard II’s hated poll tax. Now malcontent is brewing once more along the Thames estuary after the government gave permission to increase council tax by 10 per cent without a referendum because of the dire state of the borough’s finances”, says Andrew Ellson (op.cit.). Time to get out the pitchforks – and not just in Thurrock!


As we go to press, the Sunday Times of 26 February 2023 has exposed the fact that Woking, Spelthorne and Warrington Councils are also in extremely deep trouble. See Jon Yeoman, ‘Five councils that dabbled in business and regretted it’.