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Croydon Council's bankruptcy should be a warning for the UK government: https://www.instituteforgovernment.org.uk/blog/croydon-councils-bankruptcy-warning-uk-government
Hm. Why does one council issuing an arcane-sounding 'Section 114' tell us anything about local government as a whole?
Good question: a
Good question: a
On 11th November, Croydon council issued a Section 114 notice – meaning the council cannot spend money on things it is not legally required to provide – such as parks and community centres: https://www.bbc.co.uk/news/uk-england-london-54897296
Some say that Croydon was just one bad apple
Looks a bit like that at first glance. Croydon had invested a lot in commercial property and didn't have much spare cash if anything went wrong - not a very resilient mix - BUT...
Looks a bit like that at first glance. Croydon had invested a lot in commercial property and didn't have much spare cash if anything went wrong - not a very resilient mix - BUT...
...Croydon is not the only council under pressure
Big falls in revenue, higher demand for services, and increases in the costs of providing those services are putting pressures on all councils, who have to balance their books each year: https://www.instituteforgovernment.org.uk/publication/performance-tracker-2019/local-authority-financial-sustainability
Big falls in revenue, higher demand for services, and increases in the costs of providing those services are putting pressures on all councils, who have to balance their books each year: https://www.instituteforgovernment.org.uk/publication/performance-tracker-2019/local-authority-financial-sustainability
UK govt has provided some more funding and compensated some lost revenues but (in aggregate) did not plug the shortfall councils face this financial year: https://twitter.com/TheIFS/status/1330910467942998018
(Tier 2/3 extra £ announced today not included - but I doubt that will change the conclusion)
(Tier 2/3 extra £ announced today not included - but I doubt that will change the conclusion)
As a result, many will still feel pressured to cut services this year, in the middle of a pandemic, to balance the books
Kent, Leeds, Manchester, and Nottingham have all warned that they will have to reduce staff numbers and cut services
Kent, Leeds, Manchester, and Nottingham have all warned that they will have to reduce staff numbers and cut services
Local authorities more reliant on income from commercial investments are in a particularly bad position - because the govt didn't compensate any losses in that income
The govt is probably worried about moral hazard - that compensating councils for lost revenue from commercial investments would set a precedent of bailing out councils which have made risky bets
In normal times - fair(ish) enough.
But these aren't normal times.
Councils are playing a critical role responding to the pandemic – the bigger risk now is that councils’ response to coronavirus is undermined by a lack of funding
But these aren't normal times.
Councils are playing a critical role responding to the pandemic – the bigger risk now is that councils’ response to coronavirus is undermined by a lack of funding
Leaving some councils in a situation where officials’ attention is focussed on how to make savings rather than tackling coronavirus is...not a great idea: https://twitter.com/felly500/status/1331668045148852229
Govt announced £1.5bn for councils to cover Covid pressures next year at the Spending Review yesterday...
...but still no explicit statement to councils about what coronavirus pressures, in principle, it will cover
...but still no explicit statement to councils about what coronavirus pressures, in principle, it will cover
This needs to change. Until it provide a clear statement of what pressures will be covered, many councils will be fighting the virus while considering how to make large savings after a decade of austerity: https://www.instituteforgovernment.org.uk/publication/performance-tracker-2019/neighbourhood-services
(H/T to @Anoosh_C and @stephenkb's discussion of Croydon on @NewStatesman podcast a few weeks ago, which was the inspiration for this blog: https://www.newstatesman.com/writers/321845 )
