Rachel Reeves’ Promise on Austerity Faces Skepticism Amidst Council Funding Concerns

During a speech at the Labour Party conference, Chancellor Rachel Reeves vowed that there would be “no return to austerity.” While her statements aimed to reassure councils and the public, the issue of funding remains a significant concern for local authorities across the United Kingdom.

Reeves’ remarks come amidst ongoing debates about the definition and continuation of austerity. While there is no universally accepted definition of austerity, many suggest it ended in the 2016-17 fiscal year when local authority core spending power began increasing annually in cash terms. Some, however, argue it was not until 2019-20 based on real terms considering inflation as measured by the GDP deflator.

Despite the increase in spending power, local authorities have continued to face significant financial pressures. The Local Government Association has highlighted a £6.2 billion funding gap. Furthermore, since austerity measures were first implemented in 2010, councils have reportedly made around £24.5 billion in cuts to services in an effort to balance their budgets.

Speaking at the conference, Reeves emphasized the importance of making “tough choices” in light of a “black hole” in public finances. She attributed the current debt situation, now equivalent to the UK’s entire GDP, to previous government mismanagement. “Public sector debt in the UK is now equivalent to 100% of GDP for the first time since monthly records began,” she stated, promising to rectify past fiscal irresponsibility.

While rejecting new tax hikes for “working people,” Reeves pledged to overhaul the “outdated” business rates system, a move that could have implications for local councils that heavily rely on such revenues. “Unless councils receive as much from the overhauled system as they currently do, working people may face a loss of services,” said John Webber, head of Business Rates at Colliers.

Reeves’ promises include increased capital investments, viewing “investment as the solution.” She criticized the Treasury’s excessive focus on costs without acknowledging benefits, suggesting that “low investment feeds decline.” The prospects of her proposed Budget next month have drawn tentative optimism from those within public sectors facing infrastructural and financial strain.

However, Paul Dossett, head of local government at Grant Thornton UK, has expressed concerns over the financial viability of councils if significant additional funding is not provided. The promise to end austerity, according to many, must accompany robust financial support to effect meaningful change in local governance.