Angela Rayner: Tories’ council fund is cynical pre-election sticking plaster

Angela Rayner has accused the Conservatives of cynically applying a “sticking plaster” to council finances to get through the next election, as local authority leaders warn that more will go bust next year.

The shadow communities secretary said Labour was “under no illusions” about the financial mess it would inherit in local councils if it gained power, after the Tories “took a sledgehammer” to budgets for more than a decade.

The prime minister, Rishi Sunak, was forced to bail out councils in England last week with a £600m funding pot to prevent a rebellion of Tory MPs who fear losing their seats. But figures shared by the Institute for Government show it would take more than £7bn in extra cash to get local government funding up to the same levels as 2010.

Analysis by the Guardian of 13 years of council spending data lays bare the scale of cuts to services. Between 2010-11 and 2022-23, real terms spending per head on cultural services was cut by 43%, on roads and transport by 40%, on housing by 35% and on planning and development by a third, with more cuts pencilled in for this year.

Council leaders from across the political divide told the Guardian the extra money announced this week was welcome but would not be enough to prevent further cuts in the coming years.

It is understood the government is exploring options for a fresh austerity drive in councils for after the next general election, after Michael Gove said his Department for Levelling Up, Housing and Communities would force councils to develop “productivity plans”.

The warnings from the levelling up secretary will add to Labour’s fears that the Conservatives are pursuing a scorched earth policy of underfunding public services in order to spend its spare cash on tax cuts to boost Sunak’s electoral prospects.

“It’s hard to see where productivity is coming from without it being a mask for further privatisation or reductions in services,” said James Lewis, the Labour leader of Leeds city council. “It feels like austerity is going further yet again.”

In an interview, Rayner said libraries, sports centres and youth provision were “not a garnish” and rejected calls from some Conservatives to reduce the types of services that councils had to offer.

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“What’s very clear to me is that we are going to inherit a very difficult situation because the Tories have brought [councils] to the brink, offering them a very small amount of money now which cynically to me is about them trying to just get them over the line for a general election,” she said.

“But it’s not going to do anything about the long-term problems that we would inherit and we’re under no illusions about the scale of those problems.”

She said Labour would have to look at the overall state of public finances if it were to take power in the next year, but it would want to move to multi-year funding settlements to help councils plan better and make sure money was directed to the areas that needed it the most.

Asked about the risk of more council bankruptcies in the next few years, Rayner said: “Yes I’m absolutely worried about that. And I think councils up and down the country are worried about that. They’ve seen these added costs … temporary accommodation, children’s services and the pressures of the cost of living crisis that’s been created by the Tories – this real perfect storm for local authorities.”

Four local authorities fell into effective bankruptcy in 2023 – Birmingham, Nottingham, Woking in Surrey and Thurrock in Essex.

Roger Gough, the Conservative leader of Kent county council, said he had warned Sunak 15 months ago the government was “sleepwalking into financial disaster” amid dramatically escalating pressure on local authorities.

He said: “The fundamental situation is unchanged. The extra funding is welcome, and it’s important for us to not be too dog in the manger about this. But the fundamental pressures are still there. We are experiencing these as are other authorities across the country.

“We all know the cavalry is not going to be coming over the hill in terms of government funding, and that will be true frankly if there is a change of government. We all have to work within the world we’re living in.”

Stephen Houghton, the Labour leader of Barnsley council, who also chairs a group of 48 urban councils in the north of England, Midlands and south, said there was likely to be a “surge ofsection 114s next year” if more money was not provided – referring to the mechanism councils use to declare effective bankruptcy.

He said it “would be churlish” not to welcome the extra £600m but it would not be enough to match inflation and demand-led pressures on local authorities. “It won’t solve the problem. It will get us through to next year but what happens the year after that? Unless something substantial happens, we’re looking at a lot more councils struggling.”

In Birmingham, where the council has been placed in special measures by the government after its effective bankruptcy in September, officials plan to shrink the authority by 15% over the next two years. Others planning deep cuts include Bradford, Kent, Hampshire, Stoke-on-Trent and Somerset.

Tim Oliver, the Conservative leader of Surrey county council and chair of the County Councils Network, said he thanked the government for last week’s “highly unusual, if not unique” bailout package. “But I might say post general election we’ll be back.”

“The sector has been reasonably clear. With increased demand, there’s a funding gap of £2-3bn over the coming years.”

The former Conservative communities secretary Eric Pickles said local council funding should be overhauled altogether, including a review of business rates, revaluation of council tax at the point of property sales and an end to the government “topslicing” the central pool for council budgets.

“Whoever is the next government, if you did it the first year, you would begin to see some benefits from it by the fifth year,” he said. Pickles also backed three-year funding settlements for councils as “something I always wanted to do”.

Many Conservative MPs say privately that the £600m bailout is only a temporary solution. One senior Conservative MP said it was “a step in the right direction but the budget will need more to prevent council cuts due to the cost of energy and cost of living”.

Ben Bradley, the Conservative MP and leader of Nottinghamshire county council, said the cash increase was a “victory”, but that there were structural pressures authorities were facing. “There’s no political benefit of going into an election saying we’re shutting down your library and your youth centre. It’s not going to work. We do need to support and protect local services.”

A government spokesperson said: “We have recently announced an additional £600m support package for councils across England, increasing their overall proposed funding for next year to £64.7bn – a 7.5% increase in cash terms.”