Official figures reveal that local authorities in the UK, who were in dire need of cash after Liz Truss’s disastrous mini-budget of 49 days ago, took out huge 50-year loans with soaring interest rates.
The government’s Debt Management Office shows that, after Truss’s Chancellor Kwasi Kwarteng announced the budget for 2022 on September 23, 24 councils took out 50-year loans between £590,000 to £40m at rates up to 4.77 percent.
In 2023, as local authorities continued to be under financial stress, they took out 29 more 50-year loans. One of these, worth £80m, was taken by Lambeth Council at a rate of interest of over 5%.
Angela Rayner, the shadow minister for levelling up, will highlight this week how successive Tory government have pushed councils to take on additional debt and adopt risky strategies in order to survive.
Rayner will argue the Truss/Kwarteng Budget saw councils locked in high interest loans which people will pay back for decades. This was a symptom of a lack of regard for local authority finances that dates back to George Osborne’s austerity campaign launched in 2010.
Since then, many local authorities are now facing bankruptcy due to real-term spending cuts of over 50%.
Rishi sunak criticised the local authorities last week for raising council tax too dramatically by more than 5 %, while some were left in financial ruin.
To raise taxes by more than 5%, council leaders must either get permission from the central government to do so or they have to hold a referendum locally. Bedfordshire was the only council that held a referendum in 2015 and lost.
Rayner will argue Tory ministers not only cut funding, but also failed to supervise them. They have ended oversight of council spending and scrapped the Audit Commission.
She will make a speech at the Labour Local Government Conference, in Warwick, calling for a new partnership between Labour and the councils. A system of “long term funding settlements” will be introduced.
Rayner’s plan will likely mean that councils are required to sign two-year agreements, rather than one-year ones. She will also promise to restore a functional system for auditing the finances of local governments, after it became clear that 95% of English councils failed to have their financial accounts approved by deadline this year.
As part of Labour’s agenda for devolution, she will also promise to give local leaders greater control over housing, planning, energy, and transport.
Rayner said to the Observer that “the Tories left working people with more debt for less money, and councils were left to pick up the pieces.” Local Government Leaders are struggling to deliver essential services in the face of Tory economic mismanagement, as demand increases amid the worst cost-of-living crisis of the last generation.
“The council tax bill is set to double in the next few years, and this Conservative government should be held responsible for any increase in council tax. The Conservative Party is the biggest obstacle in resolving local government’s crisis.
“We will give local government the respect and recognition it deserves. We also recognise the crucial role councils have in keeping services running day-in-day-out. But this comes with accountability.
Labour will begin by providing local leaders with long-term funding agreements, which will give them more certainty and allow them to plan in the future.