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Gove may blame Labour, but Tory-led councils are facing similar difficulties

In Michael Gove’s otherwise sombre speech to parliament on Tuesday announcing a team of commissioners to run the cash-strapped Labour-run Birmingham council, the communities secretary could not resist a swipe at his political opponents.

“I think it important for us to recognise that the intervention in Birmingham, and our [previous] interventions in Sandwell and Liverpool, have all been interventions in Labour-led local authorities in which comprehensive mismanagement extended back over years,” he said.

But while Gove may have relished the chance to embarrass Labour, experts say his stance may come back to bite him given how many other councils – including those run by Conservatives – are likely to follow suit.

Jonathan Carr-West, chief executive of the Local Government Information Unit, said: “It is convenient with an election so close to try to use this as a political football. But it is also a political risk. If you say this is about councils making bad decisions, what will you say when a large, ‘well-run’ Tory council like Kent or Suffolk gets into similar difficulties?”

Clive Betts, Labour chair of the levelling up, housing and communities committee, said: “He tried to make a political point, but there are rumours that others are going to follow suit in a few months, including Conservative ones.”

Birmingham faced a unique set of circumstances that forced it to issue a section 114 notice, admitting it could no longer finance its obligations to taxpayers. These included having to pay out over historical equal pay claims and a botched IT system rollout.

But the underlying problems faced by the council, which include years of falling grants from central government, limited ability to raise council taxes and high inflation in the past two years, are also being felt by dozens of others.

According to a recent estimate by the Special Interest Group of Municipal Authorities, a collection of 47 urban councils, at least 26 English councils are at risk of going bankrupt in the next two years.

Several large Conservative-controlled authorities are under pressure, including Kent county council, which auditors say needs to save £86m in the next financial year, and Gove’s own local authority in Surrey Heath, which has borrowed more than 13 times its annual income.

Gove has chosen Max Caller, a local government finance expert who has led similar delegations to Slough and Northamptonshire, to lead the team of commissioners in Birmingham.

His team will immediately be confronted with a series of decisions, including whether to hike council tax, make staff redundant and sell off assets, including the council’s stake in Birmingham airport.

There are legal limits on what can be cut, but the law is often vague on what exactly the council has to provide. Authorities must provide “a comprehensive and efficient library service”, for example, but the law does not say how many libraries must be available for a given population.

Experts say Caller is likely to cut heavily and increase taxes quickly, given his history for fast turnarounds. One person who knows him described him as the “uber commissioner”, pointing out that he even went as far as to fire the chief executive of Slough council for gross misconduct.

Carr-West said: “We don’t know which of these things will happen in Birmingham but most of them will, and they are all bad.”

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Amid the chaos at local government level, some are urging the government to implement longer-term solutions so they do not have to keep sending in commissioners to rescue stricken authorities.

One solution would be to lift the restrictions on councils raising taxes. Another would be to take money from other budgets to fund local services. Spending more on social care, for example, could help alleviate pressure on the NHS.

A more minor improvement could be made by providing authorities with longer-term funding deals so they can plan more efficiently over several years.

Shaun Davies, chair of the Local Government Association, said: “The government needs to come up with a long-term plan to manage this crisis, which must include greater funding certainty for councils through multi-year settlements and more clarity on financial reform.”

Without these solutions, many believe Gove will have to call on Caller and his colleagues again before too long.

Tony Travers, a professor of government at the London School of Economics, said: “Local government spending is on average 10% to 15% lower than it was in 2010. Councils can only survive like that for so long.”

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