The fate of local government is hanging in the balance - The Gower Initiative for Modern Money Studies

**Liverpool Town Hall cc-by-sa/2.0 – © David Dixon –** **geograph.org.uk/p/4454313**

“Surely by now there can be few here who still believe the purpose of government is to protect us from the destructive activities of corporations. At last most of us must understand that the opposite is true: that the primary purpose of government is to protect those who run the economy from the outrage of injured citizens.”

Derrick Jensen, Endgame, Vol. 1: The Problem of Civilization

The heart of our local communities is being ripped out by government-imposed austerity. Our cities, towns and villages have borne the brunt of cuts to public spending with damaging consequences for the well-being of local citizens and infrastructure. Austerity is eating away at the fabric of our communities.

The Cities Outlook 2019 report revealed that cities have shouldered nearly three-quarters of all real-terms local government funding cuts in the last decade. It also revealed that there was a clear geographical divide in where funding cuts to cities have fallen – the top five worst affected cities were all located in the North of England. According to the report Barnsley has been hit hardest by austerity and Liverpool saw the deepest cuts per resident. From adult and children’s social care services, to homecare, policing and crime reduction, support for the homeless, library services, culture, public transport and maintenance of public spaces there are very few areas which have not been subject to hard decisions as a result of cuts to central government funding. Manchester has a funding gap of £60m and intends to reduce its adult social care budget as part of a cost cutting exercise and Liverpool a gap of £90.3m which it will fill with yet more cuts. In Birmingham City Council’s financial report it warned that ‘Birmingham City Council of the future will look very different from the one we had before austerity’ In Leeds the council announced last year that ‘At this stage it has not been possible to identify sufficient savings or income generation opportunities with which to entirely close the gap in the Council’s finances over the next three years.’

Two years ago, in a letter to The Times, the Rural Coalition argued that the ‘effects of austerity and corporate cost cutting had [….] decimated vital rural services and [risked] rural communities becoming enclaves only for the wealthy.’ Between 2010 and 2016 local authorities in rural areas recorded a 32% rise in homelessness due to unaffordable rents and insufficient construction of social housing. Across the country, rural areas have suffered cuts to subsidised bus services which have been axed or reduced and libraries have closed – many are now being run by volunteers. Such services provide a lifeline for some of the poorest and most vulnerable residents who not only use public transport for getting to work but also to access healthcare and shopping facilities as well as socialising. Social isolation and loneliness are now recognised as harmful to health and potential killers.

Many local and regional and city authorities find themselves in the unenviable position of being financially strapped and having to make difficult decisions in an effort to balance their budgets. Last year the National Audit Office in its 2018 report revealed that local authorities have had a 49.1% real terms reduction in government spending between 2010 and 2018 and that one in ten could find themselves without reserves within the next three years because they have been dipping into those funds to cover their day to day spending. Those authorities which have weaker economies and rely on central government funding are less able to raise money through council tax increases forcing very difficult spending choices.

The scope for efficiencies which was the initial response by local authorities to cuts in their grants have all been exploited and there is simply no room to squeeze anymore. And with budgets being cut to the bone it has been suggested that some councils will be reduced to a core statutory provision. Last year SOLACE (the Society of Local Authority Chief Executives) warned that if the cuts were to continue then they would have no option. With the huge reductions in staffing levels across the country, one London Borough Chief Executive warned that his council’s services would become unsafe and ‘barely able to deliver on behalf of our citizens’. As the National Audit Office reported ‘the current trajectory for local government is towards a narrow core offer increasingly centred on social care.’ Without a significant cash injection from the government, councils will continue to face funding pressures and the prospect of further reductions and cuts in all services.

Despite the commitment of local government staff to keep things running the poorest and most vulnerable amongst us are being hit the hardest by austerity. Whilst they bear the painful impact of cuts to local services council staff are having to deal with the fallout caused by increased demand as people find themselves at the sharp end of welfare reforms and spending cuts. Reductions in frontline staff levels, overwork and stress combined with pay caps are all having a detrimental effect on the ability of local authorities to deliver a good service to those that need their help. As reported in the Guardian only this week local authorities are spending millions of pounds of public money on social work agencies because they are struggling to recruit permanent staff.

For hundreds of years, local government has been at the heart of our communities involved in the provision of clean water, social housing, education, policing and public parks. It was never perfect, but its public purpose aims sought to improve the lives of local people and did so. Cuts to central funding have proved to be an opportunity for those with an ideological preference for less state involvement to reduce local and national democracy to little more than a sham. It has increasingly served as a mechanism for outsourcing vital work to the private sector for profit rather than for the provision of publicly funded and delivered services. The whole public sphere has been under attack.

It cannot be repeated often enough but society depends upon sound foundations for its economic and social well-being. As those foundations are kicked away piece by piece the effects permeate across society causing harm, destroying communities and people’s lives. Rolling back the state and the introduction of private interests into the delivery of public services haven’t brought the promised dividends of efficiency and better use of public funds. The state and local government has quite simply become a cash cow for corporations the consequences of which are becoming ever clearer.

The nation’s economic and social infrastructure is crumbling under the weight of austerity. Insecurity, fear and hate are its consequences. This human suffering is a political creation and constructed on the back of the monstrous lie that austerity was essential to restore the public accounts to health.

Local government has been at the sharp end of austerity as central government funding has dried up which has caused a vicious circle of consequences. As the national economy falters due to cuts to public spending local economies begin to weaken with less money circulating to support them. With less money in a local economy, councils cannot easily raise local taxes to fill the gaping hole left by the cuts to central government funding. If they do then there is less money in people’s pockets to keep local economies thriving. And thus, the nation ends up in a race to the bottom causing yet more suffering, ill-health, infrastructure decay, unemployment and underemployment.

The reality is that whilst local government spending is restricted in its choices by the very fact that it is the currency user and relies on an income, the national government as the currency issuer is not. A sovereign currency issuing government is the policy maker and within the constraints of the finite resources it has at its disposal can spend to deliver its political/ideological priorities. It is never a question of whether the government has collected sufficient tax that determines what public services are affordable. Affordability can only be defined in resource terms, not monetary terms. Do we have the real physical resources from labour – the people who do the jobs – to those used in the production of goods and services? Those are the real choices any government faces.

Balancing budgets as if a national government were like the GLC, County, City or District councils is simply not applicable. It is therefore the role of government not to be the keepers of a public purse funded by taxation or borrowing but to spend as the currency issuer sufficiently to ensure that public purpose aims are fulfilled to create societal and economic well-being and full employment, ensure that the country’s infrastructure is sound and that it can respond to the cyclical economic downturns when they come. Contrary to common belief today’s government investment in public assets from education to health and infrastructure not only benefit today’s citizens but tomorrow’s too.

Some people might call this approach ‘socialism’ and reject it, but it is less about socialism and more about what the role of government should be in terms of delivery public purpose goals for the benefit of all. Successive governments have forgotten their duty to those who elect them and instead serve other interests – those of global corporations. Market driven, neoliberally inspired ideologies have permeated every aspect of our society from national right down to local government, even the nation’s citizens. At a time when we face some of the most critical challenges, from climate change to rising inequality and poverty, it’s time to put the brakes on and rethink the world. If not the consequences could be bleak for our children’s children.

As Rick Warren wrote:

‘We are products of our past, but we don’t have to be prisoners of it’

There is an alternative we just have to create it. An understanding of how a modern monetary system operates provides a focused lens through which that change can be brought about.