For residents of the South London borough of Croydon, seeing their council fall into financial crisis is not a new experience. The council issued a Section 114 notice to the government in late November, its third descent into effective bankruptcy in two years. Despite the political leadership switching to the Conservatives at the May local elections, this corner of London could not shake the financial shackles which tied it to poor management, investments and expenditure.
Croydon will reportedly need £130m worth of spending cuts to deliver a balanced budget next year. For a local authority with a population of around 390,000 people, this represents a dramatic restriction in investment to improve public services, with capital spending for areas such as regeneration, green spaces and business support now markedly reduced. Thurrock Council, with a recently-uncovered bank book plastered with red flags, also joined the Section 114 gang this month.
Croydon’s Conservative elected mayor Jason Perry blamed the latest financial challenge on “A vicious cycle” inherited from the previous Labour administrations. But this masks a much wider crisis in local government from a shameful dereliction of responsibility in Whitehall to support local authorities to be effective and well-led – but most of all it is a crisis of funding from central government.
These crises are not uncommon in the thirteenth year under a Conservative government. For the Labour Party, hoping to lean on its rival’s ‘levelling up’ agenda, this presents an opportunity which it simply hasn’t risen to with any real enthusiasm – despite crises in Croydon and Thurrock.
As it stands, Labour’s command of the ‘levelling up’ brief has been remarkably similar to the Conservatives, which is to say not commanding at all. Save for a few extra powers earmarked for local government post-devolution, Lisa Nandy’s stewardship of what was touted by many as a natural seat of power, as Shadow Secretary of State for Levelling Up, Housing and Communities, has yet to blossom with what a Labour government would do for levelling up. Despite clear commitments to improve local government, there’s very little beyond devolution which suggests a more fleshed out approach is coming. The fact that Lisa Nandy’s conference speech in September only made very insinuating remarks on the power of local government should be a disappointment to Labour Party councillors.
Labour should be embracing the potential of decentralisation and devolution with every policy it develops, including a clear commitment to financial resilience. Its offering from the Brown Commission is only a piecemeal interpretation of devolution policy already taking place within the Conservative government. References to improving ‘capacity’ and ‘certainty’ for local government finance are nothing new, but compared to other important discussion points on regional inequalities this has received a poor write-up without any policy substance. Starmer’s ‘Take Back Control‘ speech offered many promises of new powers for local government, but little acknowledgement that such powers would require greater funding, and greater oversight from central government. Labour’s efforts at reducing these stark disparities won’t be achieved without a local government sector equipped to deliver the kind of quality, well-resourced services needed to support its healing efforts.
Deepening the devolution framework to transfer powers of planning, economic development and housing are already on the agenda for administrations in Greater Manchester and the West Midlands. Scrapping business rates would present a new opportunity for financial independence in local councils, certainly, but this can’t be the only offer for councils hopeful for change from a supposed government-in-waiting.
Labour may also be falling foul of headstrong, blinkered manifesto writing if they believe their offer for devolution is universally popular. Council officers and chief executives may be looking for any scraps of autonomy, but it’s clear that elected councillors and leaderships are not nearly as keen for such a transformation.
New ‘devo deals’ for Norfolk and Suffolk represent a clear break with the current government, and indeed Labour’s, vision for decentralisation in the English regions. Elected mayors are no panacea, a Labour government needs to be ready to demonstrate its commitment to supporting councils with their responsibilities, even if their preference for leadership is rejected at a local level.
As it stands, Labour’s proposal for local government focuses on hopeful policy to extend council responsibilities while ignoring the importance of engagement and oversight from Whitehall. Enabling independent spending and governance can only be ensured if councils are well-funded, primed against emergencies, and given the grounds for self-improvement and investment.
At the heart of this is the local government settlement. Reforming the central government mechanism for funding local councils is desperately needed to reflect the financial challenges faced. A multi-year stream of finance, left for local authorities to calculate and administer according to their own metrics, would benefit communities much more than any number of Levelling Up Fund rounds. While the Brown Commission calls for three-year minimum settlements and ‘block’ funding, there’s very little discussion on what this could mean for council operations.
Crucially, Labour should not simply wait for the Section 114 notices to come in when councils fail. The investigation into financial mismanagement in Thurrock Council has only accelerated the need for reforming how central government works with its council partners. With new means of strengthening the operating reach of council scrutiny committees to include powers for conciliation and engagement with Whitehall and auditors, as recommended by the review led by Sir Tony Redmond, a Labour government could improve both independent governance and central oversight in one meaningful move.
If ‘levelling up’ means anything beyond a wet slogan, it exists to bring policy to tackle the local and relatable issues we see every day. Council tax reform can be part of this offer. But Beyond the ambitions of Gordon Brown’s constitutional revolution was a genuine will to transfer power and duties to local areas. Ultimately if Labour wants to emulate the transformation to regional government, as the Blair years did with Scotland, Wales and Northern Ireland, it should reflect on tackling the current barriers to growth and good governance before enthusiastically dishing out more powers for councils, who may lack the ability to manage them.
Councils are on the frontline for tackling so many of society’s biggest problems – social care, homelessness, unemployment, poor housing. The services we expect to deliver have been underinvested in and left to stagnate without leadership, effective guidance, and funding. This is a space where a Westminster government, wishing to emanate genuine enthusiasm in enabling local government to thrive and grow, could itself show its commitment to supporting people in their communities.