Why are so many local councils experiencing severe financial difficulties? Desborough Labour Party
Desborough Labour Party

The background

For the Conservatives in 1979 local government was firmly in the cross hairs and ‘reform’ was a priority for the incoming government. An excellent summary of what happened next can be found at  Local government: Margaret Thatcher’s 11-year war | Finance | The Guardian and the legacy of that period underpins the current financial crisis in local government.

The context

Conservatives have a fundamental belief in the free market and have a mindset of  ‘private good – public bad’ which greatly influences their thinking. So anything with the word ‘Public’ in the title may well be on their agenda – public transport, public housing, public highways, public libraries, etc.

The Conservative attitude towards Local Authorities is to generally make their influence smaller (Sell off assets, reduce their role, control their finances and force the ‘privatisation’ of services) This has been a significant part of their psyche for decades and it is entirely consistent with their ideology.

The impact on local councils

Local Authorities are often seen as a ‘soft target’ and Conservatives, at national level, have spent much of the past fifty years trying to ‘fillet’ councils by changing the tax and revenue mechanisms, imposing capping, controlling capital receipts, etc, and, as we can now see quite clearly, crippling their finances.

The assault on local councils started in 1979 (and has continued ever since, with a short break during a Labour Governments 1997 – 2010). The following list is just a few of the changes that have happened which have led to the current crisis.

  1. 1980 0nwards -Year on year cuts in central government grant meant that (through a mechanism called the ‘Gearing effect’) local councils would have to raise the Council Tax a considerable amount to balance the books. This led to ‘Rate Capping’ (1985) which imposed a system of severe penalties if councils raised the local tax more than the amount proscribed by central government.
  2. 1980 – The sale of council houses (which benefited many people) was followed by legislation (1985) which allowed the wholesale transfer of all their remaining council housing to housing associations.
  3. I985 0nwards- Income from the sale of council houses could not be spent on new housing and local councils were encouraged, through a system of inducements, to use the money from sales, and other capital receipt, to pay off historic debt.
  4. 1986 – Abolition of the six Metropolitan Boroughs and the Greater London Council.
  5. 1988 – Local councils were stripped of the ability to raise a local ‘Business Rate’. This was re-titled the National Non Domestic Rate (NNDR) and would be set by central government with all the money going in to pot held by and re distributed by central government.
  6. 1988 onwards -The process of breaking up council departments and privatising council services. ‘Compulsory Competitive Tendering’ would be the mechanism for this with the emphasis on ’compulsory’ and it was applied to Highways, Refuse collection, Street cleaning, Housing repairs, grounds maintenance, Leisure facilities, etc
  7. 1990 in England (1989 Scotland) – Introduction of the Poll Tax in the belief that if individuals received personal bills they would be more critical and unhappy with the local council.
  8. 1993 – The Poll Tax backfired so the Government came up with a completely new system but, to make sure local elected representatives got the blame, they called it ‘The Council Tax’.

A combination of the legislative changes listed above has left many councils facing bankruptcy, unable to deliver the services that communities need, and unable to recruit the people required to do it.

Step by step, year on year Conservative Governments took control of residential taxes, set the business rates, cut grants, privatised services, broke up the workforce, reduced the housing stock, restricted the use of capital receipts and drove local government into the serious financial crisis that it faces today.

Locally some Conservatives, who seemed quite happy, or even enthusiastic about most of the measures outlined above, now seem to expect the Labour Party to repair all of the damage that their party has managed to do over a period of fifty years whilst accepting no responsibility for what their own party has done.

How do we get this mess sorted out ?

1.We need to a national government which sees a positive role for local authorities by devolving decision making closer to the people and enabling councils to make a real difference in local communities.

2. We need a complete overhaul of the funding mechanisms for local government. The Poll Tax was an utter failure and the Council Tax resulted in the largest burden falling on the least well off. Grants from central government need to be revised to reflect the amounts required to deliver quality services that meet local needs and the  Business Rates (NNDR) system is in need of reform.


To see Labours Plans for Local Government go to –

Labour’s Plans for local Government 2024 – Desborough Branch Labour Party (desboroughlabourparty.org)

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