Councillors call on Labour leadership to back campaign to cancel council debt

A group of Labour councillors have called on the leadership of the Labour Party to back a campaign for the cancellation of local authority debt and warned that councils “face a financial meltdown”.

30 Nottingham councillors have sent a letter to Labour leader Keir Starmer, deputy Angela Rayner and Shadow Secretary for Communities and Local Government Steve Reed today, also calling for them to back council funding based on local needs.

The group has said that the government has “refused to honour its commitment to councils to ‘do what it takes’”, and described the situation facing local authorities as “unfair and unjust”. They are calling for the party to:

1. Lead a campaign for the cancellation of debts to the Public Works Loan Board;
2. Work with local councils to develop a funding framework that acknowledges local needs; and
3. Commit to an active national campaign that mobilises Labour members, the trade unions and local communities.

In June, Labour mayor of Bristol Marvin Rees joined 16 council leaders, eight MPs and councillors from across the country to back a statement by the Labour Campaign for Council Housing calling for the cancellation of councils’ debts.

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 would provide councils with an additional £4.5bn spending power each year, by removing the annual spending on servicing the debt.

The campaign has described in its mission statement how 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.

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.

The Labour Campaign for Council Housing also wrote to the leadership last month, saying that the party must “support and campaign for debt cancellation” for councils in the pandemic – or face a “new phase of austerity”.

Below is the full text of the letter sent to the Labour leadership today.

Dear Keir, Angela and Steve

As concerned local councillors and trade unionists we are facing a financial crisis that has been exacerbated by the Covid emergency, but in reality has been years in the making as austerity has taken its toll. Local authorities face a financial meltdown. We have, with the commitment of our frontline workers, continued to try and provide services, supported vulnerable residents, develop mutual aid initiatives and have worked to mitigate the worst impact of Covid-19 on our communities. The government have refused to honour its commitment to councils to ‘do what it takes’. Despite additional money Nottingham and local district councils still face massive shortfalls, without further funding jobs and services will be lost.

We therefore feel that our situation is unfair and unjust. To ask councils to cut jobs & services in the face of this funding crisis will mean our communities will suffer. As Labour councillors we are demanding action in three areas:

1) Labour nationally lead a campaign calling for cancellation of debts to the Public Work Loans Board

Over the last decade council funding has been massively cut. This has forced councils to look to other methods to raise funds, like increasing council tax, raising charges for services and being encouraged to borrow to buy property to develop rental income streams. Policy areas agreed to try meet local spending and manifesto commitments. Covering the annual borrowing costs sucks funds out of our city. Debts to the Public Works Loan Board should be scrapped to give councils a fresh start like they were in the NHS.

2) Labour nationally campaign and work with local councils on fair funding

Labour nationally works with local councils to develop a funding framework which acknowledges local needs. To highlight the need for an overhaul of the ‘fair funding’ review. If deprivation, disadvantage & service provision are to be addressed fairly, it can only be done through a system that acknowledges local need in a revised allocation formula. Campaigning for a grants based scheme that fully funds local authorities.

3) An active national campaign

The Labour Party commits to an active national campaign, a campaign that mobilises Labour members, the trade unions and our local communities. An immediate demand of the campaign is that any additional use of reserves and any new borrowing to cover extra costs of the current emergency to be fully refunded now.

The councillors named below are calling for the Labour leadership to organise a national campaign, highlighting the crisis facing our local public services and public sector workers. We are calling for this to happen as soon as possible with the leadership making an immediate public commitment to these demands.

Supported by Nottingham City councillors:

Pavlos Kotsonis, Phil Jackson, Lauren O’Grady, Cate Woodward, Salma Mumtaz, Nick Raine, Steve Battlemuch, Hassan Ahmed, Sam Gardiner, Sajid Mohammed, Ankunda Matsiko, Jawaid Khalil, Audrey Dinnall, Carol McCulloch, Maria Joannou, Chantal Lee, Adele Williams, Cheryl Barnard, Toby Neal, Zafran Khan, Mohammed Saghir, Gul Khan, Neghat Khan, Rebecca Langton, Shuguftah Quddoos, Angela Kandola, Sue Johnson, Dave Trimble, Leslie Ayoola, Linda Woodings

UNISON – Christina Sanna, Najeeb Nazir

Unite the Union – Carol Starr