There is doing more with less, and there is going bankrupt with nothing. The effects of a decade of austerity combined with the economic crisis resulting from Covid-19 has left many councils facing the latter. Localised austerity is a risk for many communities as we begin to recover from this pandemic, but this it’s a risk these communities cannot afford: greener, fairer, and more localised economic recovery plans are the only path to a sustainable and resilient future.

The National Audit Office (NAO) reported this month that around 25 councils are currently on the brink of bankruptcy, and almost four times that number are at risk of financial failure, laying bare the stark reality of local authority finances. The public spending watchdog has warned that it expects 94 percent of councils to cut spending in the next year to meet their legal duty to balance their budget sheets.

This warning comes just five months after Croydon Council declared itself bankrupt, meaning that it can no longer spend money on services that it is not legally obliged to provide, such as community centres and parks. While the extremity of Croydon’s position may feel like an anomaly, many councils are not far from joining it.

During the pandemic, demand for council services has soared. This increased demand has come in the context of a decade of austerity, which reduced councils’ spending power by over a third and meant that going into the pandemic, councils were more vulnerable than they have ever been. Extra Covid-related services have amounted to an additional £6.9 billion in council costs – from PPE equipment for carers to shelter for rough sleepers and support for shielders.

Concurrent with this soar in demand has been a sharp decline in council income. National economic crises have a way of bringing local social crises to the fore, and the reality for many citizens has been an inability to pay tax or spend money in council facilities that generate much-needed revenue. Unpaid council tax has resulted in a £2.9 billion fall in councils’ income, and the inability to spend on council-run leisure activities has led to the loss of £554 million in income. £695 million alone has been lost in car parking fees.

The government has plugged the financial catastrophe with a series of emergency council loans. Croydon Council received a £120 million emergency loan, while five others (Bexley, Peterborough, Eastbourne, Luton, and the Wirral) have collectively received £109 million in bailout packages.

The government has repeatedly refused to disclose how many other councils have approached them to avoid bankruptcy, although we know that at least £9.1 billion has been provided. The NAO has been vocal about the scale of the problem—reporting that the emergency funding ‘averted a system-wide financial disaster’—but has also joined the chorus of voices calling for councils to adopt an austerity programme to balance the books.

Councils attempting to recover from this crisis will only be able to deliver the bare minimum in terms of public services. Big ticket items, such as children’s care and adult social services, will rightfully take priority. The axe will fall instead on services that underpin the social fabric of day-to-day living: the NAO forecasts cuts in homelessness services, special educational needs funding, theatres and community centres, bin collection, and subsidies for bus routes. In essence, we are facing even further erosion of our civic and community spaces.

In recent years there has been a resurgence of ideas about redressing this by giving the community a greater role in commissioning and delivering public services, but the belief in devolving the remnants of a broken social safety net to already hard-pressed communities must be challenged. This is a slippery slope, in which a struggling community sector delivers less with less—and inadvertently contributes to the weakening and hollowing-out of local government—dressed up in the language of empowerment.

The cuts councils will be forced to make are tantamount to a government-initiated programme of localised austerity – far from the ‘levelling up’ aspirations of Johnson’s government. This approach mirrors the disregard shown for local authorities in the Budget, which will do little to take our communities and high streets off the path of accelerated wealth extraction, poor quality jobs, and unsustainable industry.

Alongside cuts to services, many councils will have no option but to increase council tax again. Another rise in council tax will heap yet more burden on low and middle income families who will be hit the hardest by a sixth year of increases in England above the rate of inflation. It is incumbent on progressives—of every stripe—to ensure that the government does not harness the valid frustration felt by these families into a justification for further cuts.

Of course, the use of council tax as a political football is not new. In both 2013-14 and 2015-16 the government ‘generously’ offered councils a grant if they agreed not to raise council tax: refusal meant the threat of a local referendum on the issue. Many councils reluctantly accepted the grant, losing tens of millions in revenue.

In the short term, the government could consider relieving council debt, either in full or partially. Around three quarters of council borrowing is funded through the issuing of public bonds. As this takes place via the Debt Management Office, the government is in a position to buy back these loans through the Bank of England. In 2012, the government used quantitative easing to buy back around £375 billion of bonds held by banks, to improve their liquidity – the same model could be applied here.

Estimates from Liverpool City Council suggest that if the government reduced their public bond debt by 50 percent, annual repayments from the region would reduce by £15 million, freeing up borrowing capacity which is desperately needed for infrastructure investment.

Longer term, a holistic reimagining of the role of local councils must take place. The ambition to ‘level up’ left-behind regions is obviously the right one, but right now the prognosis for many localities is one in which they accelerate further downwards, from their structurally fragile starting point. We need a clean break and a fair start in which we develop a national process of redistribution to deal with decades-long and ingrained regional economic imbalances.

Instead of ad-hoc, competition-style funding, we require a comprehensive local needs assessment with a recognition that poorer areas need more resources in order to achieve social, economic, and environmental justice. It is crucial that any ambition to redress this must come alongside appropriate policies and financial levers to realise it. Political rhetoric is futile without substantive delivery mechanisms.