Glasgow City Council is the largest of 32 local authorities in Scotland with an annual budget of £2.4 billion and the city’s largest employer with a compliment of some 36,000 staff (the second largest employer in the city is the National Health Service; Glasgow’s workforce is largely concentrated in the public sector). Recently buffeted by the sudden resignation of its relatively young council leader Steven Purcell amidst a cauldron of rumours, the City Council is facing enormous pressures.
This financial year alone the Council has to find savings of £60 million. Against a budget of £2.4 billion this may not seem like much but in a city so dependent, directly and indirectly, on the public sector even quite small cutbacks can have huge implications. For instance, the Council is the main funder, in some cases effectively covering all core costs including salaries, for thousands of local community groups which provide services in the social care field, youth and community work and the arts. They deliver a vital back-up to council led services or provide a service where none exists. These organisations invariably run on tight budgets and a cut of even 5% to their budgets can have a severe effect on them and in some cases call into question their viability. And the council is facing even larger cuts next year and the year after that. It has already offered all staff over 50 the option of early retirement in an effort to shed 4,000 jobs (equating to 11% of all council staff).
Glasgow City Council’s (GCC) problems are shared by every single local authority throughout the UK as relatively generous settlements from central government give way to, in real terms, reduced and tighter allocations from Whitehall in order to bring down the UK government’s colossal £178 billion public spending deficit, itself a result of bailing out the British banking sector from its imminent collapse and meltdown in the autumn of 2008.
British local authorities raise only a fraction of their income from local citizens and businesses in the form of a Council Tax. In the case of GCC because it is a Scottish authority, the remainder of that money comes from the Scottish Government. But the Scottish Government in turn receives its money from the UK Treasury based in Whitehall. Now, despite the fact that the amount of money distributed to Scotland is actually proportionally greater than what it would get from London based solely on its population (known as the Barnet formula, which raises hackles with English politicians and is disputed by Scottish nationalists, as well as constantly being threatened with “review”) the fact remains that Britain remains a country which is governed in a highly centralised way, particularly in relation to finance.
In spite of devolution, none of the local parliaments in Edinburgh, Belfast or Cardiff have any real tax-raising powers (the Scottish Parliament has a very limited tax-varying capability), though there are proposals to give the Scottish Parliament some further tax-raising scope. Local authorities such as GCC have very limited powers over a narrow but important range of services such as street-cleaning, refuse collection, environmental health, administering police boards etc. And even those services such as social care and social work which also come under their direct supervision has to work within legislation, guidance, rules and procedures formulated elsewhere. In other words, local authorities largely administer services, whose direction and policy is controlled and shaped elsewhere and the financing of which is also overwhelmingly out of their control.
There are no discretionary sales taxes or other financial tools available to UK local government to raise income and diversify away from dependency on central government. With the exception of London, there are no powerful mayors able to fight the city’s corner (and even here the power of London’s mayor is constrained compared to his counterparts in cities such as Paris and New York). Even the limited tax gathering available to Scottish local authorities in the form of the council tax (which as mentioned goes nowhere near to covering spending) has been further constrained by the voluntary decision of all Scotland’s local authorities, in agreement with the Scottish Nationalist administration in Edinburgh, to freeze council tax increases since 2007.
To counter the effect of this on-going squeeze, local authorities including GCC have tried a number of responses. One is to actually cut spending. The problem here is that councils are in part legislatively obliged to provide a certain level of service. In addition councils such as GCC are committed to protecting front-line services and have to deal with strong unionised workforces if they attempt to prune staff while also facing the possibility of a political backlash from voters by cutting services or adding to the city’s dole queues. Consequently, there is actually little room for manoeuvre and councils are considerably constrained in implementing cutbacks.
This leaves two other possibilities. One which Glasgow has been promoting vigorously over the last three years is to hive off previously directly council managed services to ‘next step’ agencies. This is similar to what has happened at central government where whole sections of government departments such as Job Centre Plus or the Scottish Prison Service have become autonomous agencies. In Glasgow entire swathes of previously council run services are now run by “arms length” agencies. Since 2008 some thirteen-and-a-half thousand, or 48% of all Glasgow City Council staff have been transferred to these agencies; this is a radical change in how services are delivered to council taxpayers which has gone largely unheralded. Next step or arms length agencies are able to raise money from sources which the council would be unable to tap into and can compete directly with the private sector as well as bid to run services in other local authority areas.
The problem with this model is that local authority control can become effectively nominal and not being constrained by conventional sources of local government finance next step agencies can incur huge levels of debt necessitating cutbacks that would be politically unacceptable if they were still directly controlled by the council.
One other option of course is to privatise services. Street cleaning and elements of social care, for example, could be put out to competitive tender with the successful private contractor running the service. In theory, the council would still be in the driving seat through a combination of regulation and oversight. But the reality would be that councils would have very little control over day-to-day service delivery and probably within a short time would relinquish any substantive authority beyond a purely symbolic level.
The history of privatisation of social care services and others such as street cleaning and hospital catering over the past few decades has not been great. Terms and conditions for employees tend to worsen and the standard of service drops; this is not true in all cases, but has occurred in a significant number of places.
The main problem with privatisation of council services is that they provide a series of essential facilities designed to meet important needs. Private enterprise is great at meeting demands from competing producers/suppliers where consumers can express which producer/supplier they prefer through choice based on price, quality of service or some other aesthetic criteria. In other words, private enterprise is good at meeting demands or wants in a competitive environment. But wants are not the same as needs especially when the ‘consumer’ has a low income or is impoverished or the service to be provided is essential but cannot really vary in how it is delivered except at the margins such as street cleaning.
As has so often happens where social need is involved, privatisation of local government services results in a few large providers dominating the market subject to regulation and inspection. Standards and service is lowered, efficiency is not increased (and often it worsens), competition is non-existent after the initial tendering exercise, the imperative to lower costs becomes a key factor and any effective consumer choice is nullified despite much prattle about ‘consultation’ and eliciting the views of the ‘service user’. In short, none of the real benefits that free enterprise can bring are realised, but crucially the safeguards that came when these services were run in a non-profit making environment are seriously reduced: the worst of both worlds.
As Glasgow and other local authorities throughout the land try to wrestle with budget deficits against the background of ever increasing commitments occasioned by legislation and escalating social problems against a worsening economic background, the temptation will be to further privatise services. This will have the consequence of possibly reducing local authorities to a series of rump ‘purchasing’ entities dispensing contracts and regulating private sector providers. It will further reduce and blur the line between a public sector not-for-profit ethos and the competitive spirit of the private sector whist not achieving the benefits of either. And in diminishing further democratic control and accountability around the provision of essential services it further enlarges the democratic deficit in what is already a highly centralised political system.
In spite of the fact that the public spending deficit will dominate the next general election which is imminent, real discussion about the role of the public sector in the provision of what have hitherto been considered essential not-for-profit and vital public services will hardly feature. The insidious and steady emasculation of Britain’s public sector services and the important role they can play in a balanced mixed economy will simply not feature in mainstream political debate. And for council tax payers in a city such as Glasgow that can only portend much poorer standards of public services.