The public realm feels like it is quite literally collapsing. Schools afflicted with crumbling concrete. Prisoners escaping. Sewage being leaked into rivers.

And now, the biggest local authority in Western Europe going bankrupt. But Birmingham isn’t the first, and won’t be the last.

Birmingham City Council has been mired by a £700m bill for equal pay claims on top of £1.1bn already paid out, as well as a £100m bill for a bungled IT upgrade.

It’s no secret that local government has been hit hard by cuts after 2010. But that a growing city, full of cranes, new business, inward investment, and which so successfully hosted the Commonwealth Games last year, can just go bust like this, is an indictment of deeper issues.

With Birmingham’s undoubtedly unique issues, the Conservatives will look to voters and say, ‘Don’t let Labour do to Britain what they did to Birmingham’. Indeed, Prime Minister Rishi Sunak said, emphatically, it is “not the government’s job to bail out the council for its financial mismanagement”.

But the truth is that the government will have to do something because it is not just Birmingham facing issues.

Ultimately, to adjust to lower central funding, local councils have had to find creative ways to raise money. Going through Woking on the train, as I often do, you’d be forgiven for thinking you were in central London. But beneath the town’s shiny, tall new skyline lies a story of mismanagement as well as the council funding crisis. Look closely and you’ll notice those towers remain half-clad, and represent a near-£2bn debt-driven property speculation by the then Conservative-led administration which has gone catastrophically wrong, leaving the council in an obscene amount of debt. This is not what the booming South East is meant to look like.

Indeed, Woking and Birmingham are part of an unenviable but growing list of councils – led by both parties – that have already gone effectively bankrupt since 2018.

The now-abolished Northamptonshire was the first, with Croydon, Slough and Thurrock all issuing Section 114 notices since, and dozens more are at risk of having to do so.

We are at a real tipping point – and one with huge human consequences.


Streamlining local government

With a likely Labour government unwilling to spend money, might Labour look to make cost savings in the way local government operates?

One of the things the government have been trying to do is unitarisation – flattening county and district councils into one layer where they exist. This has been done in a piecemeal, non-uniform way. That’s not a massive problem; of course, these things should be done with some local sensitivity. But there is now a case for streamlining the process and getting it more uniformly rolled out.

It’s never a good idea to tinker with governance structure for no reason. But there’s a pretty clear fiscal case for streamlining councils into one layer, to reduce administrative costs and have some more efficiencies and economies of scale. In the now financially embattled county of Hampshire, we should look back to the PwC report from a few years back, which set out the savings that could be made with unitarisation and a combined authority

Another case for unitarisation comes from Britain having such a messy, inconsistent patchwork of institutions. This poses a problem for democratic accountability. Do voters in two-tier local authority areas really know the difference between their borough and county council? Does anyone know which one looks after bin collections, potholes, roads, schools? Voters and taxpayers deserve a tidier system than this, and so do council workers and councillors.


Funding and powers

In general, councils of all types have two duties to citizens. First, to deliver basic, statutory responsibilities. Second, to develop their places.

At the moment, councils don’t have enough money to do the former and don’t have enough power to do the latter. 

Two key principles, then, need to underpin the government’s approach to fixing these problems. The first is unavoidable: funding needs to be put in place to keep councils afloat, so they can deliver their basic responsibilities. The second is more structural: local authorities need autonomy to deliver the placemaking and levelling up their citizens deserve.

To that end, the next government needs to roll out unitary authorities, and combined authorities – with mayors or not – uniformly across the country. Accountability and scrutiny will be key here, and mechanisms need to be embedded in new local government structures.

Both parties need to look at the success of the mayoral devolution model, the trailblazer regions. Nobody wants new layers of government and bureaucracy for no reason. The solution is to have streamlined local government, with clear accountability, fewer layers where possible with strong leadership. And they need to have the money to deliver their core responsibilities, and the power to raise or cut local taxes as they see fit for their placemaking agendas.

So for both parties, don’t shy away from devolution because local councils are going bust. Devolution is the solution.