Could councils be about to sell public assets to private interests?

Chancellor Jeremy Hunt has said, ahead of today's wholly inadequate budget, that councils should cut back on 'wasteful spending'. 

But the truth is there is no more money to waste. Our councils have been desperately underfunded for years. Their local government grant has plummeted 40% in real terms between 2009-10 and 2019-20. Economists and financial analysts agree - our councils can't take it any more.

Now proposed rule changes introduced by Michael Gove, Secretary of State for Levelling Up, Housing and Communities of the United Kingdom, could see local councils selling off public assets, like parks, pools, libraries and refuse tips, to balance their books. A government consultation on the proposals closed at the end of January. And, after once again being blamed for declining services in today's budget speech, our councils are on tenterhooks waiting for the outcome. Here’s why.

At the moment, local government is allowed to buy or sell assets to fund new capital projects that meet local need - like buying land to build a new school. Michael Gove’s big idea is that councils could be allowed to get rid of their assets simply to help budget for day-to-day running costs; things like keeping the lights on, emptying the bins, or paying their staff, all of which you’d think we’re already paying for through council tax. 

Unsurprisingly this idea hasn’t gone down well with the Local Government Association (LGA), who responded by saying:

“Councils are best placed to know what works best for their community…capital receipts (and borrowing even more so) are not “free money” and they can only be spent once. They cannot be used to fund long term ongoing revenue pressures.”

In other words, as Samir Jeraj writes in The New Statesman, “Such a move might enable local authorities to plug the gaps in their budgets in the short term, but it would do nothing to tackle the underlying problem in council finances”.

One in five councils report they are on the brink of declaring bankruptcy. While individual councils have had specific problems (such as Birmingham’s £1bn bill to settle ten years of gender equality cases), the main reason so many are in such dire straits is that austerity has seen their funding streams cut by 40%. 

Here are five reasons why the Government must not open the door to more council sell-offs.

1: It takes wealth and power out of your hands. We know what happens when councils are starved of funds. Public assets get sold off or handed over to private companies, who don't have local community interests at their heart.

2: It hits your services. Using the current rules, Greenwich Council closed some of its libraries in order to sell the buildings in 2021. Birmingham’s emergency budget for 2024-25 includes shutting 25 of its 36 libraries. Overall, we've lost 800 libraries in the UK since 2010. 

3: It robs your community of its history. Northamptonshire Council flogged off some of its historical artefacts in 2014, but the short-term gain didn't stop it from going bankrupt just four years later.

4: It hits your culture. Herefordshire Council sold off its art collection in 2018. Birmingham is now planning to cut funding by 100% to all of its arts organisations by 2025. Under these rule changes, there's nothing to stop other councils doing the same.

5: It doesn't work. Despite selling property owned by the council in an attempt to stabilise its finances, Woking Council went into administration in the summer of 2013.

It’s no wonder the LGA responded to the proposal by saying “The ability to use capital resources to fund revenue costs must not be seen as a way out of the Government addressing other problems facing local government.”

The scale of the crisis facing our local councils is vast: they owe a combined £97.8bn to lenders, equivalent to around £1,400 per person. Some, like Birmingham City Council, have prepared emergency budgets involving massive cuts to public services in an effort to drag their finances out of the red. Others, like Bradford City Council, have already drawn up a list of buildings, land and other assets they may have to sell to stave off bankruptcy. That’s just under the current rules, with significant Government oversight. If the rules are further relaxed, the temptation to sell off valuable public assets including places of historic interest, just to buy themselves some breathing space, could be irresistible. 

And it would be the public who would ultimately pay the price. Councils will run out of cash-generating assets, find it harder to regenerate our communities, and experience weaker growth due to poorer public services. The death spiral of privatisation would take effect: public services defunded, cut back and less able to meet public need; public assets handed over to private capital; private capital seeking to maximise its assets and cut back even further. 

Michael Gove announced some extra funding for councils at the same time as discreetly launching this consultation. But the amount promised is nowhere near enough. 

The solution, as it always is when the spectre of private involvement in public services is raised, is to seek proper investment; in this case, we should be absolutely insisting that central government restores local government grants to their 2010 level in real terms. Otherwise, once these spaces and places are sold to private investors and developers, we won’t be getting them back.

Take action 

• Use our petition tool to send a letter to Michael Gove demanding that he does not proceed with the proposed actions in the consultation.
• Watch our video explaining what could happen if the proposals go ahead.