******************** POSTING RULES & NOTES ********************
#1 YOU MUST clip all extraneous text when replying to a message.
#2 This mail-list, like most, is publicly & permanently archived.
#3 Subscribe and post under an alias if #2 is a concern.
*****************************************************************
(This makes clear why Corbynism is gaining strength.)
NY Times, August 18, 2018
As Austerity Helps Bankrupt an English County, Even Conservatives Mutiny
By Kimiko de Freytas-Tamura
NORTHAMPTON, England — It was a seething, stomping protest in this
ordinarily genteel medieval town: Throngs of residents, whistling and
booing, swarmed the county hall. “Criminals!” they shouted. They held up
banners that read: “Tory councilors wanted for crimes against people in
Northamptonshire.”
The crime?
The bankruptcy of their Conservative-led local government, which has a
budget deficit so big that councilors are stripping away all but the
minimum services required by law. Inside the county hall, the besieged
council debated the latest round of cuts — it had already voted to close
libraries and stop repairing roads — as disgusted residents jeered.
“Your guilt should keep you awake at night,” Patrick Markey said at the
meeting earlier this month, his voice trembling with rage. “It’s
criminal incompetence and criminal politics.”
Usually, local government finance is a dull affair. But Northamptonshire
has become a warning sign of the perilous state of Britain’s local
governments. A Conservative Party bastion, Northamptonshire is leafy and
affluent, littered with aristocratic estates — yet in February its local
authority became the first in two decades to effectively run out of money.
Britain is already in upheaval over Brexit, its looming withdrawal from
the European Union, with many experts warning of economic hardship
ahead. But Northamptonshire is foreshadowing another potential fiscal
crisis: Local governments drained of resources, cutting services to the
bone.
Councils are Britain’s fundamental unit of local government, dealing
with an array of basic needs: trash collection, public transport,
libraries, town planning, and care for children and other vulnerable
people, among other things. They levy a tax on homes and charge fees for
some services. They also collect a nationally set tax on commercial real
estate, and keep an increasing share of it. But for years they received
most of their funding from the central government.
The crisis in Northamptonshire is complicated and partly self-inflicted.
But it has roots in the austerity policies and cost cutting that the
Conservative-led national government imposed a decade ago in response to
the global financial crisis. The Tories in London argued that austerity
was the responsible solution to balance public accounts and encourage
future growth.
Now some Conservatives, especially at the local level, are openly
defying what has been a pillar of the party’s ideology.
Funding from London for local governments has fallen 60 percent since
2010, with reductions expected to total $21 billion by 2020, the Local
Government Association has calculated. In response, nearly every council
in Britain has cut or outsourced services, sold off assets and tried a
host of budget gimmicks, experts in local finance say.
One in 10 of the larger councils that have obligations to care for
children and elderly people — about 35 councils in all — are in danger
of exhausting their reserves within the next three years, according to
the National Audit Office.
“There’s a slow-moving domino effect,” said Rob Whiteman, chief
executive of the Chartered Institute of Public Finance and Accountancy.
Northamptonshire was the first flashing red light. East Sussex County
Council, run by Conservatives, recently announced it would reduce
services to the “legal minimum.” The Conservative-led county council in
Somerset warned it might be facing bankruptcy. Last week, two families
won a case against Bristol City Council to block plans to reduce funding
of special education needs and disability services.
The Northamptonshire council, having run through its rainy-day funds,
now has enough money to pay only for mandatory services for the elderly
and children. Unable by law to run a deficit, the council voted in
February to shut down 21 of the county’s 36 libraries, remove bus
subsidies and suspend road repairs. (A court recently blocked the
decision to close the libraries.) At the meeting earlier this month,
some councilors seemed resigned to the angry public response.
“I am happy to apologize,” said Richard Auger, a Tory councilor. “I
think mistakes were made,” he added. “It’s a situation we’re responsible
for.”
The crisis is a political embarrassment for Conservatives, who are
already divided into warring camps over Brexit. The former leader of the
Northamptonshire council, Heather Smith, has resigned from her position,
and from the Conservative Party. Investigators sent from London blamed
her and other councilors for mishandling local finances, even as she
blamed London for impossible mandates and a refusal to consider higher
taxes.
Sounding increasingly like their Labour opponents, some Conservative
councilors in Northamptonshire are now talking about stopping the
outsourcing of public services and demanding tax increases.
“I was a believer that we had to save money, but there had to be other
ways than to slash and burn,” said John Ekins, a recently elected
Conservative councilor in Northamptonshire. “How did we get to where we
are? What the hell has been going on?”
The Graph of Doom
They called it the Graph of Doom.
It was 2013, and the Northamptonshire council was presented a Power
Point chart that depicted an unavoidable contradiction: a sharp, rising
public demand for local services contrasting with a sharp cutback in
money from the national government, as part of the austerity program led
by Conservatives in London.
“It was showing how we were all heading towards this cliff edge,”
recalled Ms. Smith, who was then a senior councilor. The cliff edge was
a shortfall of $175 million that needed to be addressed by 2020.
A committed Tory, Ms. Smith initially embraced the calls for austerity,
as did many in reliably Conservative Northamptonshire. “Being a
Conservative-run council, everybody accepted that the country had been
overspending and that it was time to scale all of that back,” Ms. Smith
said.
The problem was how to do it. The council needed to find huge savings,
but it also had limited revenue sources.
Raising taxes was ruled out, deemed ideologically unpalatable while the
Conservatives were making austerity-related cutbacks. Eric Pickles, the
government minister who oversaw local government financing between 2010
and 2015, said it was a “moral duty” for the Tories to keep local taxes low.
“Some Conservative councils had a big fight over it, and said, ‘No,
we’re not doing it,’ ” Ms. Smith said. “They had a huge amount of
pressure on them.”
Northamptonshire also had a more unusual problem. Many Conservative
councils were partly shielded from central-government cuts because they
had large earnings from the commercial real-estate tax, called business
rates.
But the concentration of blue blood in Northamptonshire actually hurt
its tax base. Much of the region is owned by gentry like the Duke of
Buccleuch, thought to be the largest private landowner in Scotland and
England, and Earl Spencer, uncle to Princes William and Harry, heirs to
the British throne.
Those holdings are generally agricultural land, said Guy Shrubsole, who
runs the investigative blog “Who Owns England?” And agricultural land is
exempt from business rates, leaving Northamptonshire even more dependent
on funding from London.
Faced with the cold reality of the Graph of Doom, council leaders
decided that the old ways of doing business no longer applied. The
council’s then chief executive, Paul Blantern, designed the “Next
Generation Model,” an initiative that pivoted the council, like many
others across the country, toward outsourcing.
Under “Next Gen,” the council would become a commissioning body,
spinning off many of the services it had been performing and, in the
process, saving millions of pounds a year.
One initiative, Olympus Care Services, was founded in 2014, as a wholly
owned subsidiary of the council. It was created to oversee adult social
care services, with the intention of generating extra revenue by selling
off surplus bed spaces to privately funded care customers.
During its first years, Olympus managed to post modest profits, as well
as reducing the overall cost to the council.
But it never achieved the projected cost savings, and as budget pressure
from the council mounted, it started recording losses — around $4
million in 2016 and $1.25 million in 2017.
“It’s all such a perfect storm,” said Simon Edwards, director of the
County Councils Network, a cross-party group that represents England’s
local authorities. “Northamptonshire was trying to be too innovative too
quickly, outsourcing this and spinning off that, that they thought would
save them money and protect some of the services.”
“They did some things wrong,” he added. “But inexorably austerity is
leading many counties into very difficult financial positions.”
The outsourcing experiment collapsed last year, before it had fully
started. By February, the council realized it had no way out, issuing a
formal notification of de facto bankruptcy. In response, Conservative
leaders in London dispatched government inspectors.
In March, the inspectors issued a damning report.
Max Caller, the chief inspector who wrote the report, said that the
county council’s troubles were self-inflicted and that the Next Gen
approach did not have any “documented underpinning” that set out how it
was expected to deliver savings.
“The things that they did were unwise,” he said in an interview. “You
could say that they didn’t want to face up to the challenges of
austerity, but all the other councils have.”
According to his findings, he said, Northamptonshire overspent by $130
million over three years and took no steps to rein in expenditure.
“Everything has been a waste of money.”
Still, he said of the financial problems afflicting other councils: “You
can’t go year after year holding down taxation rates at local level and
taking the money away and expecting the same level of service. That’s
not possible.”
A whist drive at a a community center in Roade. the wave of local
spending cuts is breaking over wealthier, traditionally Conservative
strongholds.CreditLaetitia Vancon for The New York Times
Image
Jason Smithers, incoming mayor of the town of Higham Ferrers, said he
supported higher taxes even if it jeopardized his political
fortunes.CreditLaetitia Vancon for The New York Times
Ms. Smith and other local Conservatives said the inspectors’ report was
unfair, and that the national government was wrongly scapegoating the
council. She said other Conservatives, locally and in London, grew
irritated with her insistence that insufficient funding was the core
problem.
“They wanted me to shut up about us being underfunded,” she said.
This year, the government announced some new money for councils,
including about $200 million for adult social services. Even so, some
experts say that councils are still staring at a $4 billion funding hole.
In response, according to an annual government survey of council
leaders, an overwhelming majority of county councils across England plan
to raise council tax, their levy on homes, 5.99 percent this year — the
maximum the central government will allow. Many have also said they
would like to raise business rates, a move the central government is
still rejecting.
Before declaring bankruptcy, Northamptonshire took the desperate step of
selling and leasing back a $70 million headquarters building it opened
in October. The move brought widespread public ridicule and helped
prompt the arrival of the government inspectors.
Northamptonshire’s financial troubles were clear from the moment the
government began to pull back on grants to local authorities, officials
said. What they did not expect was that a Conservative government in
London would let the county slide into bankruptcy.
“I honestly believed that the government would not let us sink because
we were a Conservative authority,” said Ms. Smith, the former council
leader. “But I was wrong. They were quite happy to just throw us out and
annihilate us, really.”
‘The Whole Process Has Gone Mad’
On July 24, the Northamptonshire Council issued a Section 114 notice
that banned any new expenditure of public money, after realizing it
needed to save almost $90 million more this year. In laymen’s terms,
this meant that the council was declaring de facto bankruptcy for a
second time.
Politics is usually sharply divided in the county, with Labour on the
left and the Tories on the right. But by the time the council voted to
shut down most of the county’s libraries, the overall scope of the
cutbacks startled many people in both parties. In recent years, the
council had also closed local centers for children and sharply reduced
educational funding.
But it was the vote to shut down the libraries the struck the sharpest
nerve, even in affluent villages like Roade, where the local library is
described as “a pub without pints.”
“I couldn’t face the libraries being cut,” said Sam Rumens, a
Conservative councilor who voted against that measure, as he sat
recently with some Labour officials at the town hall discussing
“problems of capitalism.” (“This is one of the leftiest views you’ll get
out of me today,” he told them.)
“There was a very sharp intake of breath,” he recalled when he said that
he would oppose the cuts. Labour lawmakers cheered and members of the
public who attended the debate on the budget this winter roared their
approval.
“The whole process has gone mad,” said Jason Smithers, another
Conservative politician and the incoming mayor of Higham Ferrers, as he
strolled through the town, which has yellow-brick houses that look
straight out of a Jane Austen novel and a grocer selling organic duck
and goose eggs.
Watching horse-racing — it was Ladies’ day at Ascot racecourse — at the
bowls club in Roade.CreditLaetitia Vancon for The New York Times
Like Mr. Rumens, he was a dissenter from his Conservative colleagues.
“They were like cowboys running through the town,” he said of colleagues
who voted for the library cuts. Mr. Smithers said he supported higher
taxes even if it would jeopardize his political fortunes. “I’m a
Conservative through and through,” he insisted. “But you’ve got to be
realistic.”
Council leaders in Northamptonshire said they had done everything by the
Conservative government rule book.
“We did everything that the government asked for,” said one senior
council official, who would speak only on condition of anonymity. There
was even a handbook prepared by Mr. Pickles, the minister in London, on
“50 ways” councils could save money. It suggested banning mineral water
in council meetings, scrapping subsidized canteens in favor of local
sandwich delivery firms and opening coffee shops in libraries.
In Horton, a village where elegant mansions peek from behind wooded
lanes, Wedgwood Swepston, 57, was out inspecting his Land Rover. An
Aston Martin idled nearby.
“They’ve been austere in the wrong places,” he said of the government.
“When austerity affects people who cannot look after themselves, then
you need to question whether austerity has gone too far.”
When asked about his party affiliation, he became thoughtful. “I suppose
I’m now what you call a ‘floater,’ ” he said.
“It makes me cross,” said Gloria Wagstaff, 77, expressing her discontent
with typical British understatement as she waited for a bus in Higham
Ferrers. “The whole government has lost its way.”
_________________________________________________________
Full posting guidelines at: http://www.marxmail.org/sub.htm
Set your options at:
http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
