Labour Bristol mayor backs debt cancellation for local authorities

The Labour mayor of Bristol has called on the government to “underwrite the true costs of the pandemic to local authorities” and backed a campaign for the cancellation of local government debt.

Marvin Rees has joined 187 signatories, including eight MPs and 16 council leaders, in backing a statement by the Labour Campaign for Council Housing calling for the cancellation of debt owed to the Public Works Loan Board.

The campaign has argued that the government set a precedent by cancelling the debt owed by NHS trusts to ease the pressure they faced during the pandemic, which amounted to a sum total of £13.4bn.

It has also stressed that cancelling the £82bn of local authority debt held by the PWLB would provide councils with an additional £4.5bn spending power each year, by removing the annual spending on servicing the debt.

Commenting on the campaign, Labour mayor Marvin Rees said: “I have called on national government to underwrite the true costs of the pandemic to local authorities, including lost income.

“My Labour administration supports debt cancellation, including through the Public Works Loan Board, as part of a funding solution. We have also highlighted changes to the funding formula which saw Bristol and other councils lose out.”

The campaign has stressed in its statement that local authorities entered the crisis “grossly underfunded”, and highlighted that the National Audit Office reported a real-terms budget reduction of 49.1% between 2010 and 2018.

Commenting on the demands, the Labour Campaign for Council Housing director Martin Wicks said: “The financial crisis of local authorities is spiralling out of control as councils struggle to respond to the pandemic.

“The deadly combination of increased expenditure, and collapse of income, comes after ten years of austerity, which has severely weakened local authorities. Austerity is to councils what ‘underlying conditions’ are to people who are vulnerable to the virus.”

The group has warned that the income of local councils has fallen significantly during the pandemic, with council tax collection falling and revenue from community facilities like leisure centres hit during the lockdown period.

The campaign added that the “income of council housing revenue accounts is declining as tenants, who lose their jobs or are stood down, will be unable to pay the rent”.

Councils across the country have been effected by the virus. Research by the Special Interest Group of Municipal Authorities found that its membership of 44 councils will be in debt to the tune of £2.2bn by the end of the financial year.

The group described how central government is falling short on covering the costs. It reports that Liverpool Council, for example, has an estimated £78m in Covid-19 expenses and loss of income – but has been awarded only £34m.

The campaign also highlighted the warning issued by the Local Government Association that councils will go bust without a “cast-iron commitment” from central government to cover the cost of coronavirus.

Supporters of the campaign include Labour left MPs John McDonnell, Richard Burgon, Zarah Sultana, Paula Barker, Ian Byrne, Clive Lewis, Claudia Webbe and Mick Whitley.