Groucho Marxism

A recent exchange in Sheffield between the Green councillors group on the one hand, and Trade Union & Socialist Coalition / Your Party supporters on the other, has raised an important question: what can councils actually do to resist austerity? For context, Sheffield council provides over 500 public services to the city’s half-a-million plus population. In the run-up to setting this year’s council budget, the Sheffield Your Party proto-branch organised a No Cuts People’s Budget conference to discuss a no cuts budget for the city and invited the Green Party councillors to participate. Unfortunately, not only did the Green councillors refuse the invitation, but they also made clear that they would not be proposing such a budget. Here I will dissect the arguments put forward by the Greens in support of their position.

None of the arguments made by the Sheffield Greens against a no cuts budget are new. According to them, such a budget would “hasten bankruptcy”, lead to “a freeze of all non-essential spending”, result in “central government intervention”, and many other horrors. Is there any truth to these claims? Unlike in the US, a council in Britain cannot go bust in the same way that a private company can. Because only an act of parliament can dissolve a local authority, council services and the financing to provide them are implicitly underpinned by central government. However, local authorities are legally required to set a balanced budget each year before they can issue council tax bills, set service charges, and so on. Thus, realistically, any budget set by a local authority must be balanced to avoid a legal conflict.

So how could a no cuts budget be balanced? The answer is through the use of borrowing powers and reserves. The use of borrowing powers and reserves to meet projected deficits – including reserves previously earmarked for other purposes – is, by statute, a matter of judgement for councillors to make. It should be noted as well that just because a budget has been agreed, that doesn’t necessarily mean it has to be stuck to religiously. The COVID crisis demonstrated the elasticity in the system, with nearly a quarter of councils materially overspending the budgets they agreed at the start of the 2020-21 financial year which, at the time they were voted on, were formally balanced. Although in practice it wouldn’t be possible for a council to overspend on its budgets indefinitely.

There is nothing to prevent councils from taking out a loan from the bank to properly fund public services. Indeed, this is precisely what Liverpool’s socialist council of 1983-1987 did. The council’s budget included £60m in loans in 1985 and £100m in loans in 1986 to bridge the funding gap, a technique referred to as ‘capitalisation’. As local authority funding is implicitly underpinned by central government, there is essentially zero risk of a council defaulting. This means that bank should always be willing to lend to councils even if they have no obvious way to generate the revenue required to pay the money back. Clearly, then, it is wrong to say that the means cannot be found to avoid making cuts. This is not fundamentally a financial question; it is a question of political will.

The Sheffield Greens argue that taking out such large loans is irresponsible and stores up problems for the future. But this completely ignores the impact an anti-austerity stand could have in mobilising public support. They would do well to remember that in 1991 Margaret Thatcher and her poll tax were defeated by the mass movement organised against it by Liverpool’s socialist council of the time. Do the Green councillors really think that it would be more difficult to force Starmer to retreat on local council funding than it was to remove Thatcher as prime minister in 1991? Surely it’s worth putting up a bit of a fight! As general secretary of the RMT transport workers’ union Bob Crow used to say: “If you fight you might not always win. But if you don’t fight you’ll always lose”.

Borrowing money to pay for public services would only be a stop-gap. There would be huge popular support for any council taking this approach, which would put massive pressure on a very weak and unpopular Labour government that has already been forced to make U-turns and concessions on several occasions. If enough councils took this approach it would force central government to fund public services properly. Sadly, the Green councillors in Sheffield don’t seem to understand this. Or perhaps they don’t want to understand it. One of their objections to the no cuts budget was “we don’t think it would be responsible”. This comment is very telling and suggests the Greens are more concerned with respectability than they are with fighting for properly funded public services.