One by one, England’s councils are going bankrupt – and nobody in Westminster wants to talk about it

Illustration: Matt Kenyon

A new financial year looms. The government is reportedly in the mood for pre-election tax cuts; the opposition talks of iron fiscal discipline. And all around us, a familiar disaster grinds on: constant increases in demand on our most crucial public services, which the financially blitzed councils charged with providing them simply cannot meet. The result is a story that speaks volumes about Westminster’s state of contorted denial: increasing numbers of our cities, towns and counties now face municipal bankruptcy, but no one in any position of national power and influence seems to want to talk about it.

The dire predicament of councils all over England now invites an obvious question: at what point might we collectively realise that hundreds of local crises now add up to a national catastrophe? Our political culture is too Westminster-focused to follow the stories and join the dots; the dreaded term “local government” still causes eyes to glaze over. But all over the country, the picture is now the same, and things are rapidly nearing the point of complete breakdown.

Up until last year, the handful of councils that had issued section 114 notices – a reference to the part of the Local Government Finance Act of 1988 that covers insolvent local authorities – were mostly mired in stories of financial mismanagement. Then came the fall of Birmingham city council, tipped into bankruptcy late last year by its mishandling of an equal-pay claim and a £100m IT project. By that point, a longstanding fear was becoming inescapable: that whatever the faults and flaws of particular council leaderships, a systemic crisis was about to break. The proof arrived when Nottingham city council hit the skids amid talk of a grimly familiar gap between local revenues and the sheer cost of constantly trying to patch up our fraying social fabric.

Nearly one in five council leaders in England now say they are likely to declare bankruptcy in the next 15 months. The latest places to sound warnings about financial collapse include Stoke-on-Trent, Middlesbrough, Somerset, Bradford and Cheshire East. The recently announced 6.5% increase in funds the government gives to councils will barely touch the sides. In both deprived and affluent parts of the country, the millions being cut from local services echo the fiscal savagery of George Osborne’s austerity. This time, however, there is a crucial difference. After long years of endless savings, cuts now automatically entail no end of cruelties, which is why the new Labour leader of Stoke city council has been talking about “unpalatable decisions that will hurt our sense of what is right and wrong”.

How we got here is hardly a mystery. The money councils receive from central government underwent a real-terms cut of 40% between 2010 and 2020. Inflation has put even more holes in their finances, and the pandemic caused a sudden halt to the cashflows received from car parks and leisure centres. Meanwhile, councils have to endlessly deal with the kind of social wreckage that decisions taken in Westminster and Whitehall leave in their wake. If poverty increases, so does the load placed on local social workers, not least those who deal with children’s care. When the mainstream education system pushes kids with special needs out, council budgets take another hit. A great deal of what councils are faced with is defined by one of the deepest stupidities of austerity: the fact that the hollowing out of early intervention schemes – Sure Start is probably the best example – means that people’s problems only get picked up when they reach crisis point, and therefore dealing with them is even more expensive.

As of 2013, councils have been allowed to keep more of the money they receive from local business rates – which was good news for more affluent places, but another burden placed on the kind of areas where such revenues are paltry at best. This unfairness has festered, but even comparatively wealthy areas are now feeling the pinch. Hampshire, for example, now faces a financial gap of £132m. There are plans for the withdrawal of all funding for homelessness services. Street lights are going to be switched off between midnight and 5am. There will be cuts to buses, and school crossing patrols. An estimated 4,000 people are going to be asked to contribute more to the costs of their social care.

Perhaps the most vivid element of our councils’ shared calamity centres on libraries, museums, leisure facilities, parks and what little remains of youth services. As these things are hacked back to prevent the collapse of social care, people will be pushed even further into a dystopia of rusty swings, shut-down swimming pools and the eternal complaint that there is nothing for kids to do – the everyday social reality that has all but defined the last 14 years, and now looks set to get even worse. This is why the neglect of councils’ predicament by both the media and Westminster politicians leaves a huge part of our national condition unreported: if you want to understand why so many voters feel exhausted and jaded, this is a significant reason.

Which brings us to the immediate political future. If – when? – the Labour party wins the forthcoming election, it will not make much progress if it leaves this wreckage to carry on piling up. Its own councillors, moreover, will be among the loudest voices immediately calling for help – but so far, there have been precious few signs that any will be forthcoming. Keir Starmer recently visited Leicester, where he was asked about the Labour-run city council’s fears of bankruptcy and the prospect of deep local cuts, and what he might do in response. His reply reflected that deep-seated belief that voters associate Labour with reckless profligacy, and so any calls to spend money had to be loudly resisted. “We’ll have to live within the constraints of an economy that’s been badly damaged in the last 14 years,” he said. “So I’m not going to make promises I can’t keep.”

The reason he sticks to that line might be understandable, but that does not mean it will survive contact with reality. One Labour council leader I spoke to last week talked about an inevitable shift in his party’s position. “They’re going to be faced with more section 114 notices, and more councils really struggling, so they’re going to have to find some money from somewhere,” he said. “They’ll have to do something.”

That day, I noticed, shadow ministers were hyping up a supposed watershed battle about whether children should be subject to compulsory teeth-cleaning. There, perhaps, is yet another example of the howling gap between the small horizons of our politics and a national crisis that is about to explode.

John Harris is a Guardian columnist