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Britain’s next crisis is in its town halls

Local authorities need funding that the impoverished UK is unable to provide

The lack of social housing is driving more people into homelessness. Photo: Ryan Jenkinson/SOPA Images/LightRocket/Getty

As winter approaches, local councils face the impossible task of trying to do more and more with increasingly depleted resources. Ironically, the demands on expensive council services such as social care and emergency housing are often greatest for the councils that already have the most overstretched resources. Poverty breeds poverty. Councils can now keep 100% of the business taxes generated by local businesses but, in the areas of greatest deprivation, thriving businesses are scarce.

Last month, an organisation representing 47 of the biggest municipal authorities in the country reported that a third of councils in poor areas of the country could declare bankruptcy within the next two years. This is no empty threat. The austerity era ushered in after the financial crash of 2008 saw central government funding for local authorities cut back, and it has not recovered. Meanwhile, the need for council services has escalated and the costs of delivering them, including energy and wages, has grown, particularly in the last 18 months.

According to councillor Sir Stephen Houghton, chair of the Special Interest Group of Municipal Authorities (Sigoma) responsible for the report: “The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”

He made the inevitable plea to the government for an immediate cash handout and clarity over future funding, neither of which appear to have elicited a response. But very shortly afterwards, the government did announce that it would be abandoning the nutrient neutrality rules on development. This was trumpeted as another benefit of Brexit that would enable hard-pressed developers to speed up the delivery of the housing so badly needed in the country.

Freedom to abandon environmental protections was not top of the marketing list when the concept of Brexit was being sold but, if doing away with these restrictions, while promising funding to alleviate any potential increase in pollution, might improve the housing situation, perhaps the move might not be so bad. Yet the record on keeping UK rivers pollution-free is hardly one to inspire confidence in a promise to deal with the increased pollution caused by changes in the rules. And is it really the case that the nutrient-neutral rules are such a big obstacle to those new homes?

Might a bigger problem be those cash-strapped local authorities? Because while their budgets have to cover everything from children’s social care (a massively growing cost), education, parks and potholes to social care, their role in planning is crucial.

Planning departments did not escape austerity: between 2009-10 and 2017-18, English local authorities reduced their net investment in planning by 42%. It has gradually built back from that level, but is still severely lacking. Last year, the Royal Town Planning Institute estimated that half of councils had planning departments operating below 90% strength, and 13% of them had fewer than three-quarters of posts filled.

The planning process in the UK is notoriously long-winded, not least because of the Nimby tendency prepared to challenge everything put forward. But, undoubtedly, delays in planning departments constitute a major factor in taking housing projects from the drawing board to the start of construction.

Local authorities are the key to addressing the country’s housing problem because the greatest gap in provision is that of social housing, where the dearth of supply is driving more and more families into unsatisfactory private rented property, bed and breakfast accommodation and, increasingly, homelessness. Just before Christmas 2022, Shelter quelled the festive spirit with a report that showed that 120,710 children in England were homeless and living in temporary accommodation. That equated to one in every 100 children in the country. The blight on those lives caused by such insecurity is incalculable.

Successive governments have been committed to the extension of home ownership, with numerous schemes such as “help to buy” and insistence that developers provide “affordable housing”. These schemes are potentially dangerous for those on tight incomes: what is “affordable” when interest rates are almost invisible can become completely unaffordable when those rates increase, let alone soar as they have done recently.

There will always be people in society who need caring councils to ensure they have a roof over their heads. Yet for a long time government made it difficult for councils to borrow money to build the homes they needed. Crazily, councils were able to borrow from the Public Works Loan Board, an arm of HM Treasury, at ludicrously low rates of interest to invest in commercial property. So they did and, with little knowledge of the market, they snapped up shopping centres and office blocks, car parks and cinemas, believing that the rental income would easily cover the interest payments and leave a tidy sum for them to spend on bridging the gaps in their funding for normal council activities.

For a time it seemed to work, but then the property market turned. Instead of a surplus, the councils were looking at deficits. This year, Woking became the fourth council to effectively declare bankruptcy. Its commercial property investment spree had left it with a portfolio including a Hilton hotel, but a deficit of £1.2bn.

Local authorities need proper funding that would eradicate the need for such ill-starred ventures. In the impoverished UK, it is not yet clear where that might come from.

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