Planned obsolescence: Why Birmingham was allowed to 'go bankrupt'
Alexander Norton
Birmingham City Council Town Hall building in Victoria Square in Birmingham, UK, September 5, 2023. /VCG
Birmingham City Council Town Hall building in Victoria Square in Birmingham, UK, September 5, 2023. /VCG

Birmingham City Council Town Hall building in Victoria Square in Birmingham, UK, September 5, 2023. /VCG

Editor's note: Alexander Norton, a special commentator on current affairs for CGTN, is deputy features editor for the daily British newspaper the Morning Star. The article reflects the author's opinions and not necessarily the views of CGTN.

The "collapse" of Birmingham City Council, Europe's largest local authority, is a sad tale of austerity measures, chronic underfunding, and the refusal of most major Western states to confront the cost-of-living crisis with the radical change in political direction it demands.

The immediate background to the crisis in Birmingham is the need to meet an equal-pay case. The council faced a backdated pay bill of between 650 million and 760 million pounds for underpaying women employees – historically women in Britain have been paid less for working the same role as male employees.

In light of this sudden demand, the council issued a Section 114 notice – this is a local authority's SOS. When issued, a council restricts any new spending for 21 days, except for safeguarding vulnerable individuals and maintaining statutory services. In essence, this is a declaration of bankruptcy and a demand for an emergency cash injection from the central government.

Instead, UK Prime Minister Rishi Sunak immediately ruled out any rescue package: "The council just needs to do a better job of managing the figures properly," said Sunak, using the old Tory trope of suggesting the Labour Party, which dominates Birmingham council, is bad with money.

This attempt to pass the buck fails on two counts. Firstly, non-Labour councils like Thurrock, Slough, Croydon, Northampton and Woking have also issued Section 114 notices in recent years.

Secondly, these funding crises are the result of budgets slashed by the central government, which Sunak is responsible for now, and his Conservative Party has been responsible since 2010. These crises are entirely deliberate: Like all state-funded bodies responsible for social provision under the Conservatives, councils have been set up to fail.

In the early 2010s, in response to the global financial crisis, the Conservatives pursued a program of "austerity measures," a systematic and brutal reduction in state spending. Local councils, the bodies responsible for most day-to-day services, faced deep cuts: Between 2010-2011 and 2019-2020, Birmingham's total income fell by 17 percent, forcing the council to find savings worth 736 million pounds.

It would be a mistake, however, to see the 2010s austerity measures as a snap response to the global financial crisis – they are part of a long-running, deeply ideological process that began in the 1980s, led by Ronald Reagan in the U.S. and Margaret Thatcher in Britain.

This shift, underpinned by neoliberal economic dogma, fundamentally changed how major Western governments approached public services and funding mechanisms.

In 1985, Margaret Thatcher, former UK prime minister, passed the Local Government Act, a landmark piece of legislation that signaled a sea change in the relationship between central and local government. This act, among other things, curtailed the financial autonomy of local councils and set the stage for a decrease in central government funding over the subsequent decades.

The crux of the neoliberal approach is to minimize government expenditure by reducing the state's responsibility for social provision. By decreasing funds to local councils, the central government essentially shifted the burden, forcing local authorities to either cut services or find alternative revenue streams, by selling off public assets like municipal buildings, swimming pools and even parks – or raising council tax and issuing fines.

The latter is particularly pernicious because this is not means-tested like income tax. Fines – punishments imposed for traffic and parking offences – are essentially a flat-rate tax: A badly parked Lamborghini will pay the same fine as a badly parked work van.

A tram passes Birmingham City Council Town Hall building in Victoria Square in Birmingham, UK, September 5, 2023. /VCG
A tram passes Birmingham City Council Town Hall building in Victoria Square in Birmingham, UK, September 5, 2023. /VCG

A tram passes Birmingham City Council Town Hall building in Victoria Square in Birmingham, UK, September 5, 2023. /VCG

Pulling back, we can see a similar pattern across the West since the dawn of the neoliberal era. In the United States, cities like Detroit and Stockton have faced municipal bankruptcy, plagued by some of the same issues as Birmingham and Thurrock. 

Detroit, once a thriving hub of American industry, famously declared bankruptcy in 2013. Yes, the roots of Detroit's financial troubles are multifaceted, involving decades of industrial decline, population loss, and political mismanagement. But these issues were exacerbated by cuts in federal and state funding for local governments, leaving the city with dwindling resources to address its myriad problems.

The city of Stockton in California went through a similar process, filing for bankruptcy in 2012, after years of decreasing state funding and failed local investments.

Contrast this with China, where the state takes a vastly different approach to funding local initiatives and public works. Instead of slashing budgets, the Chinese government has invested billions in massive projects like the Three Gorges Dam and expansive high-speed rail networks.

At the more local level, there is China's success in eradicating extreme poverty announced in 2021 and accepted even by its critics. Among other more drastic measures such as relocating impoverished citizens, this involved straightforward welfare and subsidies to those who qualified – the exact sort of measures being wound down in Britain. The Chinese model demonstrates an alternative pathway: one of public investment rather than public divestment.

However, compared to other major economies, China has a uniquely powerful state and a vast population that expects a lot from it. Can you balance the books if you are not a superpower with a population mobilized behind five-year plans? 

Yes. Several nations with far smaller GDPs than Britain or the U.S. have managed to implement progressive social policies successfully. Countries like Uruguay and Costa Rica have robust public healthcare systems and high educational standards, despite having a fraction of the financial resources available to larger economies.

Although UK's global position is slipping, with a 2022 GDP of over 2.2 trillion pounds, Britain still has the sixth-largest economy in the world – the money is definitely there.

But the direction of travel is unlikely to change. As well as a financial burden, councils are seen as a challenge to central authority. Despite the Thatcherite rhetoric of returning freedom to the individual, to help private interests reap the whirlwind deregulation and privatization brings, neoliberalism demands a single, all-powerful central governing body, firmly on the side of the elite.

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