Everything Must Go: Local Government Debt and the Public Asset Fire Sale — The Case of Leeds

Summary

The authors would like to thank Ronan Murphy-Coghlan and Emilie Tricarico from Climate Action Leeds who initiated this project and helped develop the approach, as well as Chris Hayes, Sarah Nankivell, Mathew Lawrence, Trisha Mendiratta and Sophie Monk for their comments and contributions. We would also like to thank Tidal Leeds, Leeds Love it Share it, Hyde Park Source, Food Wise, Clean Energy Leeds, Leeds Community Homes, Climate Action Leeds, the National Lottery’s Climate Action Fund and the University of Leeds for support and funding.

Since the onset of austerity in 2010, local authority finances in England have been squeezed from both sides — cuts in central government funding and increasing need for services. Councils are receiving significantly less central government funding at the same time as demand for statutory services such as children’s and adult social care and housing has risen sharply — driven by the very social and economic consequences of austerity itself. With thirteen local authorities having declared insolvency since 2018 — only two had issued such notices in the preceding thirty years — and a remarkable four out of five councils expecting to go bankrupt in the near future, many are looking for alternative ways to “balance the books”, such as increasing sales of council-owned land and buildings.^[1] Since 2010, local public assets estimated at £15 billion have been sold across England.^[2]

This situation has now reached a critical point. Some councils are being given special permission by the government to use capital receipts (money raised from selling assets) to fund day-to-day activities.^[3] This widening scope of use for capital receipts escalates an already unsustainable practice of asset sales. An asset can only be sold once, yet funding gaps and debt repayments are ongoing.

Leeds, the second largest local authority in the UK, is a helpful lens for examining these systemic issues in local government. This report takes a closer look at Leeds City Council’s (LCC) finances since austerity — examining its debt servicing costs, the nature and extent of its asset sales, how the money has been used and what has happened to the assets it has sold. Leeds is noteworthy as it carries a further financial burden: it holds more Private Finance Initiative (PFI) contracts than any other local authority. PFI was a controversial form of Public Private Partnership (PPP) where government departments and local authorities entered into contracts with private finance to deliver key infrastructure projects such as hospitals, schools, community centres and housing. This method of mobilising private finance was abandoned by the government in 2018 due to high repayment costs that rise with inflation.

The report’s findings add to the evidence on the tensions between debt management, financial sustainability and public assets in local government. While the practice of public asset sales is not new, we argue that selling public land is a short-sighted and ultimately unsustainable approach to both the financial crisis in local government and the wider economic and ecological challenges we face. There will come a point in time when Leeds runs out of public land and other assets to sell to plug the hole in its finances. The coming disaster of local authority finances thus needs to be urgently addressed by central government so councils like Leeds can make sensible, longer-term decisions about public assets and services that consider the climate emergency through alternative economic development paths.