Power to the (city) people: a post-election agenda for Britain

Despite all the rhetoric about cities being the economic unit of the future, many in the UK struggle to deliver #urban #sustainability because of a lack of money and power. City leaders should push for change under a new government.

When the concept of urban sustainability was being defined and refined four decades ago, the idea of effective governance was seen as essential to help politicians and citizens find the balance between the pillars of economic growth, environmental balance and social justice.

While 55% of the world's population lives in urban areas, that proportion is expected to increase to seven out of 10 people by 2050, making cities the main arena for delivering economic growth, mitigating climate change and ensuring higher standards of wellbeing.

The UK has taken some hesitant steps towards giving more powers to the leaders of major urban areas. Its recent model began with the creation of the London mayoralty in 2000 and extended under subsequent governments so that, in 2024, voting took place for 10 metro mayors across England, who would collectively control some £25 billion of public spending.

But beneath the surface, many urban local authorities are under intense financial pressures. Twelve councils have issued section 114 notices — the local government version of bankruptcy — since 2018, compared with just two in the preceding 30 years since the mechanism was created in 1988. Until the notice is lifted, the council cannot make new spending commitments or spend money on things it is not legally required to provide.

The political control of the affected councils is split with Slough run by the Conservatives, Woking by the LibDems and Nottingham by Labour, for example, making claims of political mismanagement highly tenuous. The pressure derives from the position of relative impotence that councils hold in the British system.

When the Conservative-led coalition came into power during the global financial crisis in 2020, the austerity programme it imposed fell most heavily on local government. Westminster cut its funding for councils by 46% with councils in the North and London relatively hard hit.

Some councils attempted to offset the impact by investing in projects that would aim to deliver returns over the long term, but which failed. Nottingham was hit when its council-owned energy firm, Robin Hood Energy, collapsed. Woking and Thurrock invested in commercial property schemes. The exception is Birmingham whose financial crisis is primarily due to a £760 million claim for pay discrimination.

New urban agenda

Leaving aside financial mishaps, city leaders that want to raise money to spend to improve sustainability are very limited. Outside central government grants and investment income, their main source of revenue is from the council tax.

Councils can only raise council tax bills by up to 4.99 per cent without triggering the need for a referendum. And since the council tax bands that determine the level of tax within a council area have not changed since 1991, the burden is often shared inequitably.

Any hope that this week’s General Election might lead to major reform were dashed at the BBC’s televised debate between the two main party leaders, Rishi Sunak and Sir Keir Starmer. Sunak mentioned his offer of family hubs and £500 million in additional funding for councils for financial year 2024/25 — something a majority of council leaders said would still require savings to be made. Starmer said that under his watch councils would receive three-year rather than annual settlements but conceded that the gain was to be able to manage the existing funds over a long-term period rather than receive higher levels of cash.

The calls for urgent reform are getting shriller. The Institute for Fiscal Studies says that the outgoing government’s plans for 2025–26 onwards imply that “unprotected” spending that includes councils could see cuts averaging 2 per cent to 3.5 per cent in real terms per year.

A committee of MPs in February called for “fundamental review” of the systems of local authority funding, local taxation and delivery of services. Options included land value taxes and wider fiscal devolution, neither of which are on the agenda.

One of the more far-reaching proposals came from the former Labour prime minister Gordon Brown who chaired the Commission on the UK’s Future. Billed as offering a “fresh start”, it highlighted some structural reforms that future governments should take rather than focusing on the minutiae of grant allocations within the current system.

Two recommendations stand out from an urban perspective. One is to set a legal requirement that decisions be taken “as close as meaningfully and practicably possible” to the people affected by them, which it says will put power and opportunity closer to each citizen. The second is to a constitutional requirement that the political, administrative and financial autonomy of local government should be “respected” by central government.

Moving powers closer to where policy is made is undoubtedly critical to getting city and regional policy right in Britain, as the Institute for Government said in its assessment. Wider and more imaginative thinking will be needed to ensure that city and urban regional leaders have the power and resources to take the decisions rather than having them imposed from an often distant and sometimes hostile central government.