Nick Corbishley: Bankruptcy Looms As Cash-Starved UK Local Councils’ High-Risk Real Estate Bets Sour

Yves here. Please give a rousing welcome to Nick Corbishley, who is joining our team of regular writers, initially on alternating Tuesdays. Some of you may recognize his name from previous cross-posts here or from his regular appearances at Wolf Street. Nick started blogging during the height of Spain’s financial crisis at Raging Bullshit (now called Rigged Game), under the pseudonym of Don Quijones, which is how Wolf Richter found his work.

And why “during Spain’s financial crisis” from someone with a sturdy British-sounding name? Nick graduated in history at the University of Sheffield in the late 1990s, then set off for what he envisaged as a tour of mainland Europe and Latin America and never came back. He’s now lived for 20 years in Barcelona, working as a financial language teacher, academic translator and ghostwriter for a well-respected business and economics journal.

Nick is fluent in French as well as Spanish, and voraciously reads newspapers and blogs from Europe, Latin America and the UK each day. Lambert, Jerri-Lynn and I are keenly aware of the dangers of trying to interpret foreign developments through the English-language press. We anticipate that Nick will help Naked Capitalism venture into new territories in being early and accurate, as he is with his inaugural offering, on the looming bankruptcy wave in UK local councils. It’s not hard to draw an analogy to the US, where municipalities and states are already making deep cuts in trying to balance their books, and their budget woes are set to get worse in the near and intermediate term. However, the UK train wreck has some distinctive ugly features, like a history of councils making bad levered investments, and being on the receiving end of Government-sponsored grifting in the form of the Private Finance Initiative.

Thrilled to be a part of the Naked Capitalism team, Nick looks forward to covering topics including the final consolidation (or lack thereof) of the European project; Covid-19’s impact on Latin America; government and corporate surveillance in Europe; the future of payments in a post-pandemic world; and the City of London after Brexit. So please roll out the red carpet for Nick!

The chickens come home to roost.

In the U.S., the virus crisis has sharply exacerbated the pre-existing budgetary issues facing many state and local governments. Tax coffers are running low at the same time that public debt is soaring — the result of three simultaneous processes: a massive surge in government spending to counter the virus crisis, a vertiginous slump in tax revenues, both at the local and federal level, and a sharp decline in GDP and a dizzying slump in tax revenues, both at the local and federal level, with the result that yet more debt is needed.

As more and more jobs are destroyed and more and more companies hit the wall, the tax revenues and GDP shrink even faster. The same processes are playing out in just about every national and local economy on the planet. The worse the budgetary mess before the crisis, the bigger the problems now. In the UK, where many town and county councils not only have been starved of funds and poorly managed for years, they’ve also been making big leveraged bets on commercial real estate, the fallout is already becoming visible.

Last week, the South London borough council of Croydon (population: 385,000) declared effective bankruptcy by issuing a Section 114 Notice. This bans the council from all new expenditure with the exception of statutory services for protecting vulnerable people. It also means that the day-to-day running of the council will be handed over to government appointed commissioners. In Croydon’s case, this may not be such a bad thing given how poorly the Labour-run council has been mismanaged.

A Long History of Bad Investments

Last month, a report by Croydon council’s own auditors, Grant Thornton, lambasted the council for its lax financial controls, its failure to challenge or scrutinise financial decisions made by the top brass and its low capital reserves. By last week, those reserves amounted to just £10 million, which pale against its £66 million budget hole and the £2 billion (no typo) it has taken out in loans – over a quarter of which are tied up in risky property investments. Brick, the council’s housing firm, was lent £200 million by the council to build homes that have yet to deliver any financial return.

Croydon is not the only council that has tried to alleviate its funding pressures by betting big on the commercial real estate market. In 2018-19 alone, councils across England and Wales spent £6.6 billion acquiring offices and struggling shopping malls nobody else wanted – more than ten times the amount spent in the previous three years.

Local authorities in the UK have a long history of making bad investment decisions. In the years leading up to the Global Financial Crisis, councils dumped £1.05 billion into easy access, high-interest online savings accounts offered by Icelandic banks. When the banks went belly up, in 2008, that money vanished into the ether, although some of it was paid back, in dribs and drabs, over the following years.

That experience should have served as a salutary warning. Unfortunately, it didn’t.

One small council on the outskirts of West London, called Spelthorne, with an annual budget of just £22 million, has amassed a commercial property empire worth £1.17 billion, all of it debt financed. Like many other councils, it borrowed the money from the Public Works Loan Board (PWLB), an arm of the UK treasury that is supposed to provide relatively cheap loans to councils for building new schools and other civil projects but which is instead being used to fund speculative property investments.

Breaking Point

Many of these councils invested in the commercial property market in order to offset recent spending cuts forced upon them by central government. But with a lot of commercial property sinking in value, the end result has been to push their finances to breaking point.

Croydon is only the third council to issue a Section 114 Notice this century, but given how many councils have bet big on the real estate market, there are likely to be many more to come. According to a study published in June by the Centre for Progressive Policy think tank, eight out of ten of England’s 151 upper-tier councils are at risk of going bust, as the financial impact of the virus crisis intensifies.

Many of these councils are in the most deprived areas of England, which have already borne the brunt of the government’s decade-long austerity onslaught. Between 2010 and 2015, local authority budgets shrank by £18 billion. According to the FT, this was “equivalent to a fifth of spending by England’s 300-plus local authorities, whose budget for running services… has been reduced at twice the rate of cuts to UK public spending as a whole”. The cuts have done nothing but grow since then.

After the last election, in late 2019, Boris Johnson pledged £3.6 billion for deprived towns, many in the north of England, after many pro-Brexit voters in those towns put their trust in him. But whether or not he actually honors that commitment remains to be seen.

PFI Boondoggle

Another reason why many councils are short of funds is that they are paying over the odds for essential changes to their buildings and eye-watering costs for basic maintenance jobs, thanks largely to the government’s Private Finance Initiative (PFI). First invented in 1992 by the Conservative government and then enthusiastically rolled out by the subsequent Labour government, PFI sees private companies build and run key infrastructure, leasing it to the public sector through deals usually lasting 25 to 30 years.

For the UK Treasury, the big attraction of PFI is that it allows it to keep many current liabilities off balance sheet while awarding well-connected businesses ludicrously lucrative public works contracts that provide scant value to British taxpayers. Big banks have also benefited handsomely, since the interest rate of private-sector debt — these projects are debt financed — can be as much as 2 to 3.75 percentage points higher than the cost of government borrowing.

But the cost to local councils, public service bodies and hospital trusts, even for projects that never get completed, can be crippling. One hospital trust paid more than £5,500 for a new sink while a police force paid £884 for a chair, according to figures obtained by JPI Media Investigations.

Companies involved in PFI contracts have already pocketed £100 billion since 1992, but much of the debt for projects dating as far back as the late 1990s is still outstanding. According to the Daily Telegraph, outsourcers running hospitals and other vital public services are still in line for almost £150 billion of taxpayer cash.

Last week, a government body called the County Councils Network cautioned that only a fifth of England’s largest councils are confident they can deliver a balanced budget next year without big cutbacks in basic services. With limited scope for further reductions in non-care services such as libraries, bus routes and school transport, most of the reductions are likely to fall on social care services. Over half (56%) are planning to cut access to care packages, in the midst of a global pandemic, while 27% said they will have to cut services for children in council care.

“Councils have pulled out all the stops throughout this pandemic to protect residents, maintain vital services and support the economic recovery,” said Cllr David Williams, chairman of the CCN. “To ensure that they can continue to do whatever it takes over the winter to combat Coronavirus and to prevent severe reductions to services next year, they need a significant increase in funding for 2021/22, alongside an income guarantee to protect against losses in council tax.”

Council tax is an annual fee that councils in the UK charge local residents for the local services they provide, and is one of the two main sources of funding for councils. The other is business rates, a tax levied on businesses for occupying commercial property.

The amount of council tax collected is falling, as households affected by the virus crisis have fallen behind on their payments. Business rates have also been suspended since March, even for large businesses that did not have to close during the lockdown, such as supermarket chains.

These trends are exacerbating an already grim financial situation for many local councils. Croydon borough council’s bankruptcy may have happened all of a sudden, against the backdrop of a (hopefully!) once-in-a-lifetime pandemic and largely due to problems of its own making, but many of the forces that led to its collapse were set in motion long before Covid’s arrival. And now some them are coming home to roost.

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48 comments

  1. Clive

    Ooh, I could go on forever about the UK’s Local Authorities (the formal name for “councils” — the entities include cities and unitary authorities (a bit of a rag bag of organisational structures).

    But Nick has got all the bases covered in his most comprehensive piece.

    The couple of odds and ends I can add are, this is an equal (political) opportunities mess up. Labour-run authorities are just as prone (I’d argue, more so) than Conservative-run ones to mismanagement. And often, there’s coalitions where there’s no single party in overall control, so a case there too for how smaller party groupings forced into unholy alliances don’t necessarily have better outcomes than large single party dominance of a political scene. A right-wing (ish) blog so you do have to make allowances, but City Unslicker is pretty accurate in his assessment of how Labour-run Croydon has, well, run itself into the ground http://www.cityunslicker.co.uk/2020/11/croydon-is-bankrupt-excuse-is-revealing.html through a combination of maladministration and virtue-signalling vanity projects, so is somewhat of a useful adjunct to Nick’s assessment above.

    And closer to home, political incompetence and local party infighting (I really wish I had the time and space to go into details, I know this subject well as my local Labour Party is in the midst’s of it, but is merely a bit player in the fractious mess that is your typical local government bun-fight; suffice to say it (Labour) isn’t exactly helping as it prefers score-settling and obstinacy to actually doing the right thing for voters) has led my own local authority into drifting towards a disastrous property deal — commercial real estate, for goodness’ sakes, who in their right mind would be putting a bent penny into CRE right now, I ask you… anyway — that is sure to end badly for all concerned. Not least Council Tax payers.

    Honestly, it’s dreadful. All of it. In every way imaginable. I’d have used much stronger language than Nick (wisely) did.

    Is local political and local government this bad elsewhere, I wonder?

    Reply
    1. vlade

      TBH, Council Tax payers also have a role to play. That is, the council tax is set on property values. Except, for most properties in England, the value it’s used to set it is “value that the property would have sold in 1991”. Yep, you read that right, thirty years ago.

      There are some rules when it can change (such as new build, substanial renovation etc.), but many of the houseowners will fight it tooth and nail (and any mention of repricing it is a no-go zone for elections), while complaining that the council stopped delivering some service or other.

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      1. Clive

        Yes indeed — there’s all-too-willing an audience for those promising that, say, PFI or contracting out will, by the magic of “market forces”, somehow always produce more for less.

        Reply
      2. Harry

        Indeed. Same thing is coming to the US. Its called immobilare for a reason. Only thing is US politics is so much more right wing that they will try and have the Fed finance it for a while.

        Back in the 90s I remember colleagues trying to collect money from the bankrupt Russian regions – agrobonds. One particular regional governor tried to settle a debt with 2000 soviet dentists chairs, a number of bird cages, and a vast number of steel dildos from a converted shell factory (yes, swords into plough shares, guns into butter). The dildos had not sold well. All the factories concerned had tried to settle their municipal debt “in kind”.

        I wonder how many Indian restaurants will try and settle business rates with Kormas?

        Reply
        1. vlade

          A father of a friend of mine was doing some business with then still USSR in early 90s, with what’s now Ukraine. The business associate of his tried to settle the debt by offering him the Mi-24 assault chopper with full loadouts – he even gave him a tour to show him it was all in working order.

          To this day I regret he didn’t take it :D

          Reply
          1. Wukchumni

            When the Soviet bloc party ended, one of the more common items to emerge was immense amounts of dirt cheap ammo, which coincides nicely with the gun nuttery really taking off, and it took awhile to get to the point where guns have more rights than humans in our country, but here we are.

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      3. apleb

        That’s nothing. In western Germany this tax is set based on data from 1964. In eastern Germany, due to there dastardly pinko commies being in power in ’64, it’s worse: it’s based on 1935 values.

        2018 there was a supreme court case and now there is time until 2023 to rectify this misreporting of value or the tax must be simply abolished according to the court. Obviously this cannot happen, so we have lots of infighting among all our 16 states plus federal government and of course all kinds of city governments, what to do and how to change it. All due to the fact that no matter how you change it to make it conform with the constitution again (equality principle) someone, many someones, will pay a lot more money while some will pay less.

        Definitely 3rd rail territory. Which is why it’s quiet on the surface right now I guess since in 2021 there are federal elections.

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        1. vlade

          NZ had a pretty good system IMO *)

          It was revalued every year IIRC, and basically, the “rateable valuation” was your property price starting point in negotiations on the property sale. So homeowners in generall didn’t mind it going up (as long as it wasn’t too much) as it reflected them being able to cash in more.

          Not so great for tenants, as those were up paying the rates of landlords (same as the UK though).

          *) I think it has changed a bit since I lived there, but somoene else – ChrisPacific? – can comment and update..

          Reply
          1. Conrad

            Valuations done every three years. There’s a cap on annual rates increases of about 5%. Rates made up of a general rate based on land values and service charges per household for rubbish collection, sewage and the like. Our total rates are about 0.75% of the assessed value of our house. Which I find pretty reasonable given all the services we receive in return.

            The best thing about the NZ system is the lack of political parties direct involvement in local government. Most candidates are local people who want to get involved in their communities. Although sadly this is changing. And the renaming of town clerks as CEOs (with a pay raise to match naturally) was a dreadful mistake in my opinion.

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      4. larry

        I don’t think council tax should be based on property, but on income. It could become a local income tax. There are some deep inequities in the current council tax system.

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    2. Ludus57

      I would broadly agree with Clive in his observations, but would amplify one aspect with regards to Labour-run authorities.
      With the honourable exception of Preston, in Lancashire, many Labour councils are run as virtually private fiefdoms by the local leadership. Labour’s councillor base is one of the most regressive sections of the party, relying on traditional tribal loyalties that are now breaking down, well recorded elsewhere.
      There is lots yet to play out on this one.

      Reply
  2. Pat

    I met Nick a few times in Barceloneta when I lived there. He’ll be an asset to you I’m sure. The past role of the UK councils in enriching credit worthy buyers of council property is well known. I failed to see any mention of this in his discussion however. That’s not a criticism but simply a comment about local authorities and what the people who run them are capable of doing for the less well connected but solvent. Councilors and local officials have not been squeamish about enriching themselves or their friends. In fact the potential for the enrichment of the favoured few is probably the main motivation for many of the people involved. Its difficult to see what you can do about this. Public housing is also one of the big political issues in Barcelona and central to the platform of the current mayor.. I was a small scale property investor there in the first decade of this century. The market moved up very rapidly in naughties until 2008 when it went into a spectacular decline equally quickly. The roller coaster ride was interesting because, at least in Barceloneta, Air BnB was widely seen as the saviour of the over mortgaged speculators. The response of the authorities was to levy spectacular fines and then, some time later, institute some penalties for the “misuse” of private property that could lead to actual property seizure. Squatting was another activity that went through an interesting vogue. When the local government intervenes so dramatically in the property market there is an opportunity to study cause and effect. It seems to have been quite profound. (I haven’t had anything much to do with Barcelona for half a decade but I retain some local friends.) At some point I’d love to see Nick’s take on this and the consequences of the Ayuntamiento’s policies on the local economy. For the sake of clarity I should say that I had nothing to do with the Air BnB issues and rented in the normal fashion to local tenants who were registered. But as a landlord I was conscious that all landlords were tarred with the same brush and as an investor I was happy to get out of there without any major loss.

    Reply
  3. OpenThePodBayDoorsHAL

    Yes there was incompetence, but how many councils were forced out the risk curve by BOE interest-free money policies? Maybe a big part of the blame gets placed where it belongs.

    Reply
    1. Clive

      Yes, this is definitely a factor. “Everything is like CalPERS” as, I think, it is Lambert’s way of putting it.

      Which it is, in every sense of the phrase.

      Reply
    2. vlade

      A large part of that was also the Westminster (aka the Downing Street) cutting off council funding sources. Again, a good bipartisan effort, running for decades.

      Reply
      1. Clive

        The one niggle with the “it’s all central government’s fault” deflection — and I’m not for a moment pretending austerity hasn’t caused a tonne of problems in this area — is that, while proper funding would solve a lot of these sorts of problems, there’s no amount of funding which could, or should, save local authorities which are flat-out useless or who have made bad investments and now want someone else to blame.

        But I’m stumped for solutions as to how you can tell the deserved bankruptcies from the underserved bankruptcies.

        Reply
        1. vlade

          Where I see “central govt fault” is that it pushed, over the decades more and more things on the council, while taking away funding for it – so services which were funded centrally (social care, for example) fell on councils. Which made the council both harder to run (yet another area where they needed to build expertise) on the same budget as before.

          At some stage, this broke down because no-one pretty much wanted to go into council unless a star eyed idealist or those who were exactly what they were after (bribes)

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          1. PlutoniumKun

            The UK system has an inbuilt bias I think towards passing cuts on to local authorities, along with extra responsibilities. This allows London to look responsible, while local government levels take the blame. It goes back a long way – I remember in the early 1990’s a Council worker showing me photographs of some of the parks in his responsibility dating back to the 1930’s. At the time, most were dull, but fairly functional grass and wooded open areas. The photographs of bygone times showed flower beds, park keepers in Europe, bandstands, public toilets….. all generally very well maintained. Years of steady cutbacks – even preceding Thatcher, had gradually eroded the public realm in ways so slow even locals didn’t always notice. One thing I noticed in the 1990’s on my first trips to Eastern Europe, even impoverished countries like Serbia, was how well looked after public spaces tended to be in comparison to the UK.

            The issue of the quality of staff is an interesting one. The pay structure in local governments is notoriously rigid, meaning that someone working for a Council in London is functionally paid far less than one in a small northern town. I don’t know how anyone could survive in London on even a mid level professional grade in something like engineering or social work. But it could be a very cosy job to have the same salary in, say, Darlington or Preston. I haven’t had enough contact to know if this has a significant impact on quality of delivery or corruption, but I suspect it does.

            Reply
            1. Jan

              I ve read the “rotten boroughs” section of the bi weekly “Private Eye” since the 90s, and local corruption, mismanagement and general incompetence is striking. Also striking is that the incompetent opcouncil eorkers gend to get snother nice job somewhere else.

              Reply
              1. Jan

                Sorry tried to edit, but was too late. Last sentence should be: Also striking is that the incompetent council workers tend to get another nice job somehere else.
                Ps
                Private Eye is a UK publication

                Reply
        2. Upwithfiat

          But I’m stumped for solutions as to how you can tell the deserved bankruptcies from the underserved bankruptcies. Clive

          The Austrian “solution” is a crushing deflation that destroys the good with the bad. So much then for the Austrians even apart from their detestable precious metal worship.

          But there is a way out:
          1) Deprivilege the banks, this would be massively deflationary.
          2) Counter the deflation in 1) with equal fiat distributions to all citizens financed, if desired, with $trillion (or £trillion) coins.

          This should restore demand as much as it can be restored given Covid restrictions and without price inflation.

          Reply
  4. Larry

    Welcome Nick! I’ve followed you at WolfStreet and look forward to more coverage here.

    This local governance story reads like the large problem of western economies being in the grip of the FIRE sector. Add in that lovely anti-government grift of outsourcing, and oh my do you have a problem of high expenses, incompetent to no service, and further spiraling decay of public capabilities.

    Reply
  5. PlutoniumKun

    From an outsiders perspective, UK local authorities have always seemed to have found a bad spot between financial independence and responsibility. They are too shackled and politicised to have clear lines of responsibility for spending and fund raising, but they have too much financial scope to get themselves into deep trouble. This is often a feature, not a bug, as the Tories have long loved giving local governments enough rope to hang themselves, so they can blame everything on urban authorities. This is exacerbated by the awful lack of transparency in the way they are run – in the 1990’s I had frequent close professional encounters with local governments in the UK and I could never work out who actually had power and responsibility to do anything, and I’m not sure the majority of Council officials and elected representatives knew either. Since then, I suspect that the pressure to raise funding from land speculation and PPP’s has made things even worse. The impression I get is that its not so much that the local governments at a high level themselves are bad, but that they are made up of warring fiefdoms, each preserving their own budgets jealously from the other, and often their own funding sources too.

    Perhaps its a case of ‘the grass is greener’, but it does seem that for all sorts of reasons local authorities in northern and central europe are better run, with clearer sources of funding and more genuine public participation in decision making. A lot of this I think comes from a much longer history of local autonomy in countries as varied as Denmark, Germany or Switzerland.

    The situation is the entire opposite in Ireland – historically, Dublin has kept local governments on an extremely tight financial rein. This has led to often very poor decision making and sclerotic systems, but has the virtue of ensuring that there aren’t too many financial black holes lurking (so far as I know).

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  6. Christopher Herbert

    This first graph by your new journalist indicates to me he doesn’t understand the finances of a monetary sovereign nation. “In the U.S., the virus crisis has sharply exacerbated the pre-existing budgetary issues facing many state and local governments. Tax coffers are running low at the same time that public debt is soaring — the result of three simultaneous processes: a massive surge in government spending to counter the virus crisis, a vertiginous slump in tax revenues, both at the local and federal level, and a sharp decline in GDP and a dizzying slump in tax revenues, both at the local and federal level, with the result that yet more debt is needed.” At the Federal level no public debt is required to fund any Congressional spending. Debt is not intrinsic to funding Congressional spending. Congress creates new currency to pay all its bills. As long as the spending matches resources available, inflation will not be a problem. Right now there’s more idle labor that needs employment. Worrying about finances is not the deficit that needs attention. Congress has the fiscal power to fund all this–including propping up local government entities. Britain, no doubt, has the same fiscal power.

    Reply
    1. Lou Anton

      State debt (e.g., Illinois) is still public debt. And it’s correct that state and local government tax coffers are running low and [their] debt is soaring.

      Reply
    2. Yves Smith Post author

      Huh? You are the one who has this wrong. Did you manage to miss that this is a post about UK councils, which are local governments, and Nick explicitly compared them to US state and local governments, which like UK councils, are currency users? Congress has absolutely squat to do with funding their budgets.

      Your comment was an extended “put foot in mouth and chew” exercise.

      Reply
  7. The Rev Kev

    First off, a hearty welcome to Nick Corbishley. I was amazed about the bit where it said ‘One small council on the outskirts of West London, called Spelthorne, with an annual budget of just £22 million, has amassed a commercial property empire worth £1.17 billion, all of it debt financed.’ I was more so when I found out that only 95,000 people live there. I wonder how many of them are actual ratepayers.

    I have read and heard about problems with Councils both in the UK and Oz for years now. Not that many years ago a lot of Councils were amalgamated here in Oz to save a lot of money in administration. All that happened then was that people were more remote from their local councilors and those Councilors proceeded to give themselves massive pay rises as they dealt with ‘larger responsibilities. Some Councils have even since de-amalgamated.’ But getting back to the UK, there were some solutions floating around back in the 80s-

    https://www.youtube.com/watch?v=b8TxUkZ3gxA

    Reply
    1. Clive

      Yes, yet more head-in-hands material there. In my county of birth, resented and maligned from its inception, called at the time “Humberside”, this was later de-amalgamated back into its former constituent parts. Conversely, where my mother-in-law lives, her previously well-liked and fairly small (thereby reasonably accountable) county has just been merged into a lumbering “Bournemouth, Christchurch and Poole” (or BCP as it is disparagingly known) lash-up.

      The wheels on the bus go rounds and round, round and round, round and round, the wheels on the bus go round and round, all day long…

      Reply
    1. barefoot charley

      Ditto. I’ve appreciated both of them, Senor Quijones for years, at Wolf’s site, which I learned of here. Barcelona is a unique window on everything that can go wrong with neoliberalism, and much else.

      Reply
  8. Mareko

    Before I moved to Botswana I had the pleasure of spending several years auditing the books of East Ayrshire Council, based in sunny Kilmarnock, famously home to the Johnny Walker distillery. I have a couple of comments to make related to Nick’s piece, although I should start by commending NC’s fine catch – I too have read his excellent work on Wolf Street and he will fit in perfectly here, I think.
    The majority of local authority funding comes from a formula derived central government grant, with council tax and business rates playing a supporting role in the total budget. When I left the UK the revenue support grant was around 70% I think of the total, and central government exercised oversight of significant spending decisions. It was a wonderful way of keeping the councils in line, whatever their political perspective. Since then budgets have fallen significantly, central government funding in some cases apparently being cut by up to 50%. In a form of inadequate compensation, councils have been given 50% of the rates collected from businesses in their area, whereas previously all such rates were collected and redistributed centrally (poorer boroughs have presumably lost out). Councils have also been given some freedom to increase council tax by a few % more than has been normal. The end result is a massive cut in overall funding, slightly offset by an increased tax burden on locals who blame the council, rather than the people who really hold the purse strings.
    PFI is a magnificent boondoogle, as the unfortunate council tax payers of East Ayrshire are all too aware. When I reviewed their PFI documentation I noted the application, as was required, of a Level Playing Field Comparator, which was a wonderful way of making the public sector look inefficient. When you break down the costs of building public assets using internal resources, you add an LPFC % adjustment to take account of the ineluctable fecklessness of public servants. LPFCs were invariably calculated to make the cost of borrowing the funds privately look less than the cost of fecklessness + borrowing risk free from the PWLB. And as a result of those clever calculations, East Ayrshire Council, if I remember correctly, owed around five times the value of the schools that were eventually built under the programme.

    Reply
  9. Eustache de Saint Pierre

    Perhaps only a small example of little note, but this half finished large block of student accommodation that I got an eyeful of on my last visit to my old hometown, could be an illustration of an aspect of the mess, which is perched right opposite the super duper modern recently built Council offices, that replaced the now empty older version. A group of landlords lost money on this eyesore which doesn’t exactly make my heart bleed.

    It was not so long ago a quite attractive & busy market town & it is the work of both Labour & there once polar opposites, that the only thing now missing is tumbleweed.

    https://www.stokesentinel.co.uk/news/stoke-on-trent-news/architect-struck-after-dishonestly-claiming-2491719

    Reply
  10. Nick Corbishley

    Maybe, Diptherio. Barcelona En Comu is not right at the top of my list of topics to cover, but you never know. One thing’s for sure: a lot will be happening in this neck of the woods in the months to come.

    Reply
  11. Nick Corbishley

    To Yves, Lambert, Jerri-Lynn, Clive and all NC commenters: thanks for rolling out the red carpet and giving me such a warm welcome. It’s great to be here.

    Reply
    1. Janie

      A belated welcome! Have enjoyed your writing. I’m a bit wistful; I love Parc Guell, Las Ramblas and the huge public market. Oh, and the dancing in front of the cathedral.

      Reply
      1. Nick Corbishley

        Janie,

        It’s all still here, just a lot quieter than usual, which is actually pretty nice. The Sardana dancers have gone but they’ll be back.

        Reply
  12. Tom Bradford

    Nearly half a century ago I was involved with UK local government, and in those days most of the councillors, senior local government staff and local businessmen were also members of a certain semi-secret fraternity with silly secret handshakes and passwords, aprons and white gloves, and… Well, I’m sure you know what I mean. And yes I was a brother, as it was expected.

    Was it a bad thing? Yes it greased the wheels. Yes you were far more likely to get contracts if you were on the inside. Yes hints were dropped and schemes were hatched, not in lodge but in the social events surrounding it. But it did impose a discipline. It did militate against ‘unacceptable’ levels of corruption as it was as gossipy as the WI and reputations did matter if you wanted to retain the advantages. It wasn’t exclusive – anyone with ambition could apply to join but if you already had a reputation for ‘unreliability’ you didn’t get in and if you abused the advantages you gained through brotherhood there were repercussions.

    I believe it worked pretty well and effectively, as a forum to promote good ideas and stifle bad ones, lubricate efficiency, put a brake on corruption and promote the ideal of community.

    From what I now hear that’s all largely lost. The institution didn’t change with the times – women now have a far greater role in both government and business, national if not international conglomerates are now the big businesses in localities but are divorced from the communities they serve and ‘local’ government is just another big business run from Westminster – it has become irrelevant and nothing has replaced it.

    The world has turned – in few ways for the better, in my ageing view.

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  13. Karl Greenall

    I would broadly agree with Clive in his observations, but would amplify one aspect with regards to Labour-run authorities.
    With the honourable exception of Preston, in Lancashire, many Labour councils are run as virtually private fiefdoms by the local leadership. Labour’s councillor base is one of the most regressive sections of the party, relying on traditional tribal loyalties that are now breaking down, well recorded elsewhere.
    There is lots yet to play out on this one.

    Reply
  14. Glen

    Nick, thank you!

    I foresee lots of opportunities to report on the US government effort to defund everything (police included).

    I continue to be amazed at how we have created a banking system that now props up private banks and corporations with trillions, while state and local public government goes broke.

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