16 January 2013

By John Medhurst

The cuts to local government funding are forcing employees into private sector jobs, where terms and conditions lean too far toward the employer and trade unions may not even be recognised. Meanwhile, public services that make life bearable for most of us are being taken away.

In two years' time, many local authorities – responsible for the provision of public services and quality of life in our major towns and cities – will face severe financial crisis. By 2020, there could be almost no local public services at all, and little quality of life, in those towns and cities. The responsibility for this devastation will rest with the Conservative-Liberal Democratic government, and any succeeding government that refuses to restore pre-2010 funding levels to local authorities.

Faced with a financial deficit created by the actions of banks and financial institutions, and the cost of bailing them out, a government of millionaires has decided that ordinary people will pay for it. It is driving through public spending cuts on a scale never before attempted, which will be destructive of many of the things in society that make life civilised and bearable.

Part of this is a huge, unprecedented and utterly destructive cut to the money available from central government to Local Authorities to deliver vital public services that people rely on. Since Osborne's "Emergency Budget" in 2010, the Department of Communities and Local Government's (DCLG] level of Grant to Local Authorities has been cut by 28 %, with more cuts to come. This means councils now have to either cut services – old people's homes, community centres, pre-school groups, libraries, bus subsidies, council house and infrastructure repair and lunch clubs for the elderly - or raise revenue on their own.

The only real way to do that is to raise Council Tax. However, the government has now capped the amount councils can raise Council Tax at 2% (less than the current rate of inflation) without an expensive referendum – nowhere near enough to plug the gap in the budget left by the cut from the government. In this way, the government has forced councils to slash back on local services or to outsource them completely to private sector firms. Employees TUPE transferred from the council usually receive harsher terms and conditions from private sector firms, who are more hostile to trade unions, fair pay and work-life balance policies.

Tory Barnet Council is now adopting the extreme “Easy Council” model of outsourcing nearly all council services. Last December, a £275m contract for local services was outsourced, and another worth up to £750m will be awarded shortly. These will hand over responsibility to firms such as Capita, BT and EC Harris for the running of building control, planning, highways and transport, the crematorium and cemetery, trading standards, parking, licensing and environmental health.

Barnet does this willingly. Most councils do not, for they know that the level of cuts that councils are expected to deliver will devastate their communities. Many will simply cease to function. Birmingham City Council’s Labour administration has forecast that it will lose almost half of its current controllable expenditure by 2017, and has predicted "the end of local government as we know it". Northamptonshire's Conservative Council has offered local unions a hard choice for 2013 – a 3.6% pay reduction and cuts, or more than 300 compulsory redundancies.

Funding for local authority social care across Britain has dropped by more than 6% in a year. In Tory Westminster, the Council admits an extra 1,200 of its residents will be homeless in the next year. In Anglesey, teaching assistants face the sack. In July, a legal challenge to North Somerset Council's decision to decimate youth services with a 71% cut was dismissed. In 2011, the Institute for Fiscal Studies found that around two-thirds of primary schools and over 80% of secondary schools would see real terms cuts by 2015. The government has cut the budget for new social housing by 60% over four years, and is now pushing councils to set rents for new tenants at or near high private sector rates.

Neither will the Third Sector take up the slack. In Liverpool, local authority funding for the voluntary sector has been reduced by £18m, or nearly half. National Philanthropy Capital estimates that government funding for the voluntary sector will be reduced by between 25% (£3.2 billion) and 40% (£5.1 billion). As many as 39% of social enterprises received the majority of their funding from statutory sources, while 51% received public funding of up to half their income. Much of this funding will now be removed.

Some councils (primarily Labour and the sole Green Council in Brighton and Hove) have attempted to safeguard essential services, with varying degrees of success. Brighton and Hove’s minority Green administration has set a budget for 2013/14 which manages to protect all children's services and all libraries without sacking staff (although it faces severe funding cuts next year and may not be able to repeat that feat). By contrast, Newcastle's Labour Council has to save £90m over the next three years, forcing it to axe more than 1,300 jobs, close libraries and swimming pools, and cut its arts budget by 100%.

But despite efforts to make so-called "efficiencies", by the next election councils across Britain will have been stripped to the bone. By 2015, many will not have enough money to pay for the minimum level of services that they are legally obligated to deliver. After meeting legal obligations to provide minimal care and clean the streets, councils currently have a total of £24.5 billion left to fund all of their other commitments. The Local Government Association estimates that by 2020 that figure will fall to £8.4 billion – a two-thirds cut.

There may be some level of efficiencies and sharing of services that can lessen cuts to a small extent, but a) these have diminishing returns, and b) no matter how ingenuous, they simply cannot close a 28% funding gap. That is why the Leaders of Newcastle, Liverpool and Sheffield Council, in a letter to the Independent at the end of 2012, warned that "rising crime, increasing community tension and more people on our streets will contribute to the break-up of civil society if we do not turn back".

Public Services Analyst John Tizard considers that they cannot expect any improvement in funding in the next spending review "if the Coalition remains committed to its current macro-policies. There can also be little prospect of any sizable increase in grant – if any – from a Labour government in 2015". This is likely true, while Labour remains wedded to its "cuts lite" economic strategy whilst simultaneously spending billions on a pointless nuclear submarine programme.

The cuts are economically illiterate. They reduce government revenue, by reducing income, spending and tax take across the country, and thus drive the country further into recession. Economists such as Nobel Prize winners Paul Krugman and Joseph Stiglitz - joined now even by the International Monetary Fund – have warned against such austerity, and have advised that the UK needs to increase spending to invest for growth.

They miss the point. The government's cuts are not driven by economic necessity, but by class war. They are a political project to reduce what remains of the British welfare state to a patchwork of disconnected services delivered by private firms or charities. As it does this, the banks that were bailed out in 2008 were set to make about £35million in 2012, a 16% increase on 2011. In 2011, the pay of directors in the top 100 companies rose by 49%. While most workers' pay is frozen or cut, banks and other financial institutions paid out £13bn – that's billions, not millions – in bonuses in 2011-12.

If left unchecked, this level of austerity will create a society with no public service values at all – no art without price, no education for its own sake, no care for young and old delivered for love not money, no health service without a market, and no utilities for free. This is the government's vision – the privatisation and commercialisation of our local services and the creation of an under-funded "ghetto" of minimal services for the poorest in society.

The dilemma faced by local councils who wish to preserve local services is acute. They can wield the axe for the Tories, providing Cameron/Osborne/Pickles plausible deniability for unprecedented cuts. Or they can work together to resists these cuts – to refuse to be complicit in an act of criminal irresponsibility perpetuated by a government with no legitimacy and no mandate for its actions. It is now imperative that voluntary groups, campaigners and trade unions, in alliance with those Labour and Green councillors who would stand with them, use any and all means necessary to defend local services.

Hear John Medhurst speak and answer your questions about the destruction of public services under the Coalition alongside other experts including UNISON General Secretary Dave Prentis at our forthcoming The Public Sector: Cuts, Privatisation and Employment Rights conference.

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