Are Schools, Care Homes, and Sports Clubs Being Sold Off to Tackle Council Debt?

Communities in the UK are facing significant challenges as councils sell off public assets to address a growing debt crisis, with total borrowing reaching £122 billion. This trend has led to the closure of vital facilities like schools, care homes, and recreational centres, raising concerns about long-term public value and services.

Last updated: 24 October 2023 (BST)

Understanding the Council Debt Crisis in the UK

The financial landscape for local councils in the UK has deteriorated significantly over the past decade. Faced with a growing mountain of debt, councils are increasingly selling off publicly owned facilities to manage their finances. This article will delve into the factors contributing to this crisis, the implications for communities, and potential solutions moving forward.

The total debt of UK councils has reached £122 billion, equivalent to £1,700 per resident.
Many councils are now permitted to sell off assets to fund day-to-day services.
The sale of public assets has increased, with councils selling £2.9 billion worth over the past two years.
Government reforms are underway to address the broken funding system for local authorities.
Calls for debt write-offs and a restructuring of the council funding system are growing.

The Rise of Council Debt

Since 2010, UK councils have been permitted to borrow money for various purposes, including the construction of new schools and the maintenance of essential services. Many have also invested in commercial ventures, such as shopping centres and solar farms, to generate income. This borrowing was often facilitated through the Public Works Loans Board (PWLB), which provided loans at relatively low interest rates until 2022.

However, the financial landscape changed dramatically with rising interest rates, exacerbating existing debts. The Public Accounts Committee has warned that council debt levels have become "unsustainable," contributing to a 7% increase in combined debts over the past year.

Financial Mismanagement and Its Consequences

Many councils have resorted to selling off public assets to pay for day-to-day services, a situation that Dr Jonathan Carr-West of the Local Government Information Unit (LGIU) describes as a short-sighted solution. The ability to sell assets, known as "capitalisation directions," is intended to provide councils with temporary relief. However, it adds to their overall debt burden.

In Croydon, for example, the council has sold off over £210 million worth of public property in an attempt to manage its £1.5 billion debt. This has included closures of community facilities such as nurseries and sports clubs that play crucial roles in their communities. The long-term impact of these closures raises questions about community wellbeing and safety.

The Impacts on Local Communities

As councils dispose of public assets, the ramifications for local communities are profound. Facilities like the New Addington Leisure and Community Centre and the Greenwich Equestrian Centre serve as vital resources for community engagement, youth development, and social cohesion.

For instance, the New Addington Leisure Centre, which housed a boxing club, has been instrumental in reducing youth crime by providing a constructive outlet for young people. The head coach, Bill Graham, has expressed concerns that without these facilities, at-risk youths may turn to crime. Financial pressures have forced the council to make difficult decisions, but the social costs of those decisions are often overlooked.

Communities Fight Back

Local communities are not taking these changes lightly. In Greenwich, a community-led effort to save the equestrian centre has garnered over 4,500 signatures. Residents believe that the facility, which was meant to inspire local children following the 2012 Olympics, is too valuable to lose. The council's decision to sell it has been met with disappointment and frustration, particularly as it was made without proper consultation with the community.

Businesswoman Tao Baker, who has proposed a community ownership plan for the centre, argues that the sale would be "short-sighted" and would not significantly impact the council's debt. She emphasises the importance of community involvement in decision-making processes, especially when it comes to public resources.

Government Response and Reforms

The government has acknowledged the financial challenges facing local councils and has proposed reforms to the funding system. Prime Minister Sir Kier Starmer has promised to overhaul the central grant funding distribution, aiming to simplify the complex funding formula and ensure that resources are directed towards the most deprived areas.

Moreover, the Ministry of Housing, Communities and Local Government has pledged over £3.4 billion in new grant funding for local services, aiming to address the immediate needs of councils struggling to meet their financial obligations. However, critics argue that these measures are insufficient and that a fundamental restructuring of the funding system is essential.

Calls for Debt Write-Offs

As the debt crisis continues to escalate, there are increasing calls for the government to consider writing off significant portions of council debt. Dr Carr-West has noted that many councils are on the brink of bankruptcy, with one-third reporting that they could face insolvency within five years without substantial changes to their funding. The urgency for a resolution is clear, as the current trajectory is unsustainable for both councils and the communities they serve.

Looking Ahead: Potential Solutions

While the current situation appears dire, there are potential avenues for improvement. First, a comprehensive review of the funding model for councils is essential. This could involve transitioning to a system that accounts for local needs and prioritises sustainable community development over short-term financial fixes.

Additionally, fostering community engagement in decision-making processes can help ensure that local voices are heard. By involving residents in discussions about asset management and community resources, councils can better align their actions with the needs of the populations they serve.

Finally, exploring alternative revenue streams, such as public-private partnerships, may provide councils with the financial flexibility needed to improve services without resorting to asset sales. This approach could help balance the need for immediate financial relief with long-term community benefits.

FAQs

What is the total debt of UK councils?

The total debt of UK councils has reached £122 billion, equating to approximately £1,700 per resident.

Why are councils selling public assets?

Councils are selling public assets to manage increasing debt levels and finance day-to-day services amid a funding crisis.

What are capitalisation directions?

Capitalisation directions allow councils to sell assets and take out short-term loans to cover day-to-day expenses, despite increasing overall debt.

What are the risks of council borrowing?

The risks include unsustainable debt levels, loss of public assets, and reduced community services, particularly as interest rates rise.

What solutions are being proposed for the council debt crisis?

Proposed solutions include a comprehensive review of the funding model, community engagement in decision-making, and exploring alternative revenue streams.

The ongoing crisis facing UK councils poses significant challenges for communities across the nation. As asset sales continue, questions about the future of public services and community wellbeing remain. What steps will be taken to ensure that local authorities can serve their populations effectively? #CouncilDebt #PublicAssets #CommunityWellbeing