Middlesbrough Council is running out of money and faces having to agree drastic measures if it is to set a balanced budget for 2024-25, as legally required. The council’s executive (cabinet) will be recommended on Wednesday to approve an application to the government for exceptional financial support to enable it to break even.
It is the first council in the North East to reach this dire position, though others are having to contemplate more cuts to balance the books.
Savings under consideration in Middlesbrough include closing the Captain Cook Birthplace Museum or handing it over to another operator, moving to fortnightly bin collections, charging for green waste collections and cutting 75 posts (though there are currently 180 vacancies in the areas affected).
Councillors need to save £20mn and are currently running a public consultation on how to save £14mn of that in the coming year, including the measures above, with another £7mn to follow in 2026-27.
But this is not enough, and officials are recommending that the mayor and councillors ask the Department for Levelling Up, Housing and Communities (DLUHC) for exceptional financial support to enable them to raise a bridging loan to support short-term financial recovery.
“Technically,” says the council’s website, “councils cannot go bankrupt.” But if the budget cannot be balanced, the government might intervene in the running of the borough, as has happened in places like Thurrock, Nottingham, Woking and Birmingham. Independent commissioners could be appointed and democratic decision-making suspended, councillors have been warned. The consequences would be “draconian.”
It could mean only services that are legally required like social care and bin collection would be provided, with others put at risk. Many more jobs could be lost and the government might impose a much larger council tax increase than the 4.99% being proposed by the council.
How has it come to this?
It’s long story, dating back almost five decades but becoming bleaker during the more recent years of austerity. It was a Labour environment secretary, Anthony Crosland, who told councils in 1975 that the “the party’s over”, and the squeeze on their finances has been unrelenting almost ever since.
But it has been since 2010 that the most severe cuts have been imposed. According to the Institute for Government (IfG), local authority spending power– the amount councils have to spend from a combination of government grants, council tax and business rates – fell by 17.5% between 2009/10 and 2019/20, before partially recovering. However, in 2021/22 it was still 10.2% below 2009/10 levels.
The fall in spending power is largely because of reductions in government grants, says the IfG. They were cut by 40% in real terms between 2009/10 and 2019/20, from £46.5bn to £28bn (2023/24 prices). This downward trend was reversed in 2020/21 and 2021/22 as the government made more funding available to local government in response to the pandemic. But even then the fall was still 21% in real terms between 2009/10 and 2021/22. Without the Covid extra it would have been 31%.
At the same time as government grants were being cut, rates of council tax, set by individual councils, were increased. Local authorities raised 30% more council tax, in real terms, in 2021/22 compared to 2009/10, according to the IfG.
What’s more, because of the way the government allocated funding cuts, the most deprived local authorities experienced the largest falls in spending power between 2010/11 and 2019/20, says the IfG. This has changed since 2020/21 and the most deprived councils have had the biggest increases, but this has been achieved mainly through one-off grants, so there is no guarantee the trend will continue, says the IfG.
Government funding for Middlesbrough fell by £37.7mn (46%) from £81.2mn iin 2013/14 to £43.5m in 2023/24, without taking account of inflation, according to the council.
Middlesbrough is the most deprived borough in England, as reported by North East Bylines, with a proportionately heavy call on local government services. It spends 83% of its annual budget on providing social care – £54.6mn on children and £49.8mn on adults.
According to the council, the number of child protection plans in place in the borough is 140 per 10,000 children – more than three times the national average of 43.2 per 10,000 and over twice the regional figure of 64.8– and the number of adults admitted to residential and nursing care homes is 42.4 per 100,000 population – again more than three times the national average of 13.9 per 100,000 and more than twice the regional figure of 17.8..
With such a large proportion of its budget going on social care, it is inevitable that many of the proposals being considered in the budget are targeted towards saving money in social care departments, while at the same time, says the council, making sure it can continue to deliver a safe and effective service. Proposals being put forward involve saving £7.7mn on adult care and £6.4mn on children’s care cumulatively by 2026/27.