This article was first published in the Hackney Gazette. To read the latest edition, see here.
A big welcome to the new Mayor of Hackney – Caroline Woodley. She is a formidable campaigner, dedicated public servant, and tireless champion of Hackney. I know she will always protect and fight for Hackney.
But after thirteen years of Conservative government, austerity, and deep cuts to local authority budgets, she inherits a tough situation.
Across the country, we have seen councils issue Section 114 notices – a step that immediately halts all new spending and acts as a flashing red light that a council is at serious risk of becoming bankrupt. These notices have been issued by councils such as Birmingham, Northamptonshire county, Croydon, Woking, Thurrock – all councils with various flavours of political leadership and with varying reasons for financial troubles.
Thankfully this isn’t the case in Hackney, which has been in safe hands and well managed – but there are big challenges ahead and difficult decisions will have to be made.
The bigger picture, and the reason behind why there has been such a large uptick in the number of councils issuing Section 114 notices, is that local government has been chronically underfunded for more than a decade. The National Audit Office paints a stark picture – spending power for local authorities has been cut by over a quarter since 2010. And this fall is largely because of reductions in central government grants, which were cut by more than 50 per cent in real terms between 2010/11 and 2020/21.
The Audit Commission, which was abolished by the David Cameron government, previously acted as an early warning system for bankruptcy in local government. Now that this important work has been privatised, local leaders are left in the dark on their own finances. In 2021/22, only 12 per cent of local government bodies received their audit opinions within the deadline for accounts publication.
Local authorities and councillors are not magicians. They cannot conjure resources from the air. Austerity has pushed councils into difficult decisions about who to help and what to cut.
And things have only become tougher after the Liz Truss government crashed the economy. The cost of goods, services, living – everything has shot up. Families are struggling to make ends meet. And so are local councils.
This won’t change overnight. Resilient local finances are built on a growing national economy and long-term, secure funding settlements. Neither of these are likely to change under this Conservative Government.