Shadow Chancellor Rachel Reeves blames Government for councils going bankrupt

The Leeds West MP, who will enter Number 11 Downing Street if Sir Keir Starmer becomes Prime Minister after the next general election, said she recognises the pressure local authorities across the country are under on Friday, December 1.

Nottingham City Council issued a section 114 notice on Wednesday, November 29, becoming the seventh local authority to effectively declare bankruptcy since 2018.

“There’s now a number of local authorities that have gone bankrupt or are on the verge of it and obviously it is very worrying for local people,” Ms Reeves told the Local Democracy Reporting Service at a visit to Knaresborough.

“Nottingham has made a commitment that front-line services won’t be affected, but the truth is after 13 years of Conservative government you have local authorities of all different political parties facing extreme financial pressures.

“One of the pressures is on social care and one of the commitments that Labour has made is that an incoming Labour government would get rid of the tax loophole whereby you can claim non-domicile for tax purposes and you don’t pay your taxes in Britain.

“We would close that loophole and put that money into the NHS to reduce the pressures on the waiting lists, which in turn would ease some of the pressures on local authorities.

“We recognise the challenges they are under and we want to start to turn that around.”

The amount people pay in council tax each year is based on a valuation band according to a property’s value on April 1, 1991.

When asked whether this is fit for purpose, Ms Reeves said: “I recognise that council tax bands haven’t changed for quite a long period of time now, but I also recognise that we’ve now got the tax burden at its highest level for 70 years.”

Coun Claire Douglas, the leader of the City of York Council, has previously urged the Labour Party leader Sir Keir to change how councils are funded.

The City of York Council is currently making cuts to services in order to decrease its forecasted £11.1m overspend and balance its book as councils are legally required to do each year.

“It just can’t go on like this,” Coun Douglas said in October. “In York, for example, our spending power since 2010 has reduced by 40 per cent. It puts a huge burden on the council taxpayer and the business rates payer.”

Ms Reeves said: “I think the common theme here is the party that’s in power in Westminster, rather than the party that’s in power in the town hall. After 13 years of Conservative government, you’ve got so many local authorities from all different political parties getting into financial difficulties because of the policies of this Conservative government.”

A spokesperson for the Department for Levelling Up, Housing and Communities told The Guardian in October: “We have made £5.1bn of extra funding available to local authorities through the local government finance settlement, making almost £60bn available for the sector, up 9.4 per cent on cash terms on 2022-23.

“We continue to monitor pressures on all councils and we stand ready to talk to any council that is concerned about its financial position. Councils are ultimately responsible for the management of their own finances, but the government has been clear that they should not take excessive risk with taxpayers’ money.

“We have established the Office for Local Government to improve the accountability for performance across the sector.”