Nineteen councils allowed to sell assets to pay for services

Nineteen cash-strapped English councils will be allowed to sell property and other assets to pay for services next year, the government has announced. Councils are normally banned from selling assets to cover day-to-day spending.

But the government is relaxing the rules for authorities in deep financial trouble, including Birmingham and Nottingham. They will also be allowed to raid their long-term investment budgets.

The move will enable the local authorities to raise up to £1.5bn to help balance their books. The government said the financial wriggle-room had been provided on an “exceptional basis” to help them deliver services from April.

It comes amid a wider cash crisis for local government, with many councils warning of cuts to parks, leisure facilities, and culture, as well as maximum council tax rises of up to 5%, to meet cost pressures. Councils in England will have £64bn to spend next year, assuming they raise council tax by the maximum, including an extra £600m announced in January following pressure from councils and MPs.

Ministers say this is 6.5% more than the equivalent allocation for this year.

But councils argue this won’t cover longer-term financial pressures caused by a rising demand for mandatory services they provide, such as social care, as well as rising costs due to inflation.

Now the government has announced that 19 councils will require additional flexibility to balance next year’s budgets.

It is significantly more than the eight given equivalent flexibility this year, or the five that received it the year before.

‘Significant local failures’
The nineteen include Birmingham, Woking, Thurrock, Slough, Nottingham and Croydon in London – six of the eight English councils that have effectively declared bankruptcy.

The biggest budgetary wriggle room, of £685m, has been offered to Birmingham, which is proposing to raise council tax by 21% over the next two years to cover budget shortfalls.

In a statement, the local government department said some of these cases had resulted from “significant local failures in governance and financial management”.

Eleven of the 19 councils will also get support worth over £900m to balance budgets from this year, and previous years.

The changes means the councils will be able to use their long-term investment budgets to pay for day-to-day services, something they are not normally allowed to do.

This can include money raised through the sale of council-owned assets such as land, or buildings including community centres, swimming pools, and civic halls.

They could also get greater flexibility to use assets to borrow from a Treasury-backed loans board, although it is not clear at this stage how many will use this, or to what amount.

‘Last-minute reprieve’
In a statement, the local government department said it was releasing the information “in the interests of transparency” following behind-closed-doors talks with struggling local authorities.

It added that the support did not include direct grants to councils, and there would be conditions attached to the support.

This could include external reviews to assess their financial management, and “improvement and transformation plans” to help them stabilise their financial position in the medium term, it added.

Local Government Association, which represents councils in England and Wales, said the additional flexibility given to councils should not be a “substitute for a long-term plan to sufficiently fund local services”.

The Local Government Information Unit (LGIU), a think tank, said it was a “last-minute reprieve that wards off immediate financial collapse”.

“But we should not mistake this for generosity on the part of the government,” added Jonathan Carr-West, the LGIU’s chief executive.

“They are simply allowing councils to borrow and to sell their own assets,” he added.

The nineteen councils given increased flexibility are:

Cheshire East
North Northamptonshire
West Northamptonshire

Source: BBC

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