Swindon Council should demand that the government cancels local authority debt

Swindon Tenants Campaign Group media release

To prevent a collapse of council services Swindon Council should demand that the government cancels local authority debt

Swindon council’s £14 million shortfall of funding is not over the entire financial year but just the first 4 months. The situation is worse than that figure suggests for the simple reason that the financial impact of the pandemic will be ongoing and not short-lived. In the absence of a vaccine people will rightly fear for their health and will not ‘return to normal’ any time soon. Add to that mass unemployment and rent and council tax collection will fall owing to the dire circumstances that people face. Two thirds of the short-fall for those 4 months is uncollected council tax and business rates. This will pile up higher through the year.

Russell Holland admits that without additional government funding the situation “will become unsustainable”. “I cannot say with hand on heart that there is a way out of this situation.” There is a way out of this situation but it requires radical action, ‘thinking the unthinkable’.

Firstly, Swindon Council should demand that the government commits to funding the increased expenditure resulting from dealing with the pandemic, and covering their lost income resulting from the lock-down. The government told councils to “do whatever is necessary” and they would compensate them. They should not be allowed to renege on that commitment.

The Local Government Association has said the government needs to provide councils with an additional £6 billion just to get by in this financial year. Councils are warning that they will have to declare section 114 notices indicating that they have insufficient income to cover their expenditure.

Given the fact that councils have a legal obligation to set a balanced budget the only way they can do this (if they so chose) is to implement cuts to jobs and services. After 10 years of austerity the results will be worse than the Osborne cuts. The social consequences will be disastrous. People who need help will not get it. Key workers who have played a critical role in providing services, often at risk to their health and lives, will be thanked with redundancy notices.

One measure which can help prevent a collapse of council services is cancellation of local authority debt; an emergency measure which would provide councils with an extra £4.5 billion a year. For Swindon this would mean writing off around £308 million held by the Public Works Loans Board. This would save in interest charges on the debt alone possibly £15 million a year.

The government itself has set a precedent by writing off NHS debt.

Swindon Tenants Campaign Group, is supporting a national campaign for debt cancellation (see cancel-local-authorty-debt.org ) which has the support of 16 council leaders, including Bristol Mayor Marvin Rees. Jim Grant, Swindon Labour Group leader is also support the call for debt cancellation.

We are calling on Swindon Council to demand that the government

1) Honour its commitment to cover increased council expenditure in dealing with the pandemic and loss of income resulting from the lock-down.
2) Cancel local authority debt held by the Public Works Loans Board
3) Call for urgent negotiations for a “new financial settlement” for councils with funding based on an annual assessment of social needs.

Martin Wicks, STCG Secretary, said:

“The unprecedented financial crisis faced by local authorities as a result of the pandemic threatens the collapse of council services. Councils, whatever their political colour, will have insufficient money to carry out their statutory duties. Clearly it is right that the government should cover both the extra costs of dealing with the pandemic, and the loss of revenue resulting from the lock-down. However, even if we manage to get the government to fund all this, the impact of the pandemic will be longer than this year.

In an unprecedented emergency an emergency measure of cancellation of local authority debt, would be the simplest and quickest means of stabilising the finances of all councils. Failure to do that in the context of the social and economic shock of the pandemic will immiserate millions of people whose finances are being stretched to breaking point.

Ultimately, there needs to be a funding system based on social needs in each locality, assessed and uprated annually. However, that will not happen before the financial crisis reaches the point of councils failing. So debt cancellation is the quickest and surest way to prevent councils collapsing.”