DID YOU know that there is a local authority in the UK that spends more than 100 per cent of its council tax revenue on staff pension pots?
This is how Shetland Islands Council uses 111 per cent of its council tax revenue, while authorities in Hackney, South Oxfordshire, Newcastle-under-Lyme and the Orkney Islands all shell out more than half. Another 19 spend at least a third of what they take in. Together these 24 councils have squirrelled away almost £3billion of taxpayers’ money into staff pensions over the past five years.
No wonder the potholes don’t get filled.
Since the passing of the Localism Act 2011, the power of local authorities has been extended to enable them to ‘do anything that individuals may generally do’, as long as that is not limited by any other Act. On the pretext of reducing centralisation, this has opened the doors to a financial Liberty Hall, so that, 14 years later, many local authorities have piled up huge debts, some even facing bankruptcy. The Act has paved the way for a plethora of risky investments made by individuals with little or no practical or managerial experience, and with no risk whatever to their personal finances. Council officials have been hell-bent on squandering public funds without any accountability, while long-suffering council taxpayers endure ever poorer services and tax bills rocket.
Long gone are the days when voluntary councillors were drawn from the business and professional locality, with a Town Clerk keeping an eye on the finances, their activities restricted to providing essential local services. Nowadays, councils are managing budgets running into many millions. The ballooning of pension entitlements is just for starters.
As budgets increased, council staff may well have chafed at the imposed restrictions. By the 1990s, scandals started to emerge, not least the notorious ‘swaps cases’. Hammersmith and Fulham council, among others, entered into rate swap agreements with banks, transactions which were later deemed illegal, since they were speculative and lay beyond their powers. The final costs of this fiasco were enormous. The banks were estimated to have written off £600million as either unrecoverable or compromised through litigation. To date, no one has tried to estimate the corresponding losses to the local authorities.
Following the Localism Act, councils identified opportunities to ‘invest’ public money as a means of seeking additional sources of income. Attention was turned to ‘opportunities’ in commercial property and energy companies. A report from the TaxPayers’ Alliance in 2021 revealed a degree of naivety and recklessness which is difficult to exaggerate.
Some councils purchased shares in independent energy companies, or set up their own. Between 2026-17 and 2019-20, UK councils lost £74,106,589 which they either owned or invested in. The eight council-owned energy companies lost a combined £114,022,019 and three of them are now either in administration or liquidation.
In spite of these calamities, several councils persevere in running up significant debt. The highest indebted authorities include Woking Borough, Thurrock, Cardiff, and Swansea. Birmingham City Council have reported liabilities of £6.9billion, and declared effective bankruptcy in 2023. Reasons contributing to this profligacy include the usual whining about years of underfunding, the cost of living, equal pay settlements, pension commitments, and the spiralling costs of Special Educational Needs. But the real scandals have emerged where councils have undertaken commercial investments, for example in property, to generate ‘necessary’ income.
A case in point was highlighted recently when a review commissioned by the Government highlighted the Surrey borough of Spelthorne, where poor reporting and a ‘limited understanding of finance’ had led to a mountain of debt standing at more than £10,000 per resident. The council had borrowed over a billion pounds against annual core spending power of just £11million, which is comparable with a mortgage holder managing to borrow 100 times their income. An impressively naive comment from their inspection report in March stated ‘inherent risks are beginning to materialise and could accelerate rapidly’!
The council in Thurrock, Essex, having ignored ‘multiple red flags’, blew £665million of taxpayers’ money on alleged sham solar farm ‘investments’. A Serious Fraud Office investigation is under way. It has been left with debts of £1.5billion, is now bankrupt, and has saddled residents with a 23 per cent tax increase over three years.
Councils now operating under Reform leadership have identified the massive waste in time and resources of virtue-signalling Net Zero targets under the guise of climate emergencies, especially by bringing forward the government’s own 2050 target deadline to 2030. Councils involved are devoting millions of pounds to de-carbonise offices, waste collection trucks, and all council-run services.
Nigel Farage urges all these targets to be scrapped, since ‘it’s not the job of local councils to deal with global issues’. Mike Stoddart of Pembrokeshire county council has branded this climate emergency action as virtue signalling on stilts. ‘If the council ceased to exist,’ he said, ‘it would make no difference whatsoever to the Earth’s climate.’
Critics are beginning to suggest that serious change is needed. But it doesn’t take a financial adviser to know that local council officers should be nowhere near big-time commercial speculation. All councils should be focusing on key local services, full stop.
As a priority, the Localism Act needs to be repealed, and local authority responsibilities clearly defined. There should be a legal responsibility to balance the books, and officers unwilling or unable to do so should face dismissal. Financial improprieties such as those listed above should be treated as criminal offences, and dealt with accordingly. Most of all, given the scope of council duties, there needs to be a significant improvement in the calibre of individual allowed to stand for, or work in, local authorities. Minimum standards of training and qualification are obviously essential. Indeed a basic course in double-entry bookkeeping would be a good start.
Changes like these are the only way to stop the rot, eliminate the massive waste, and remove any potential for corruption, thereby ensuring that hard-pressed council taxpayers receive the quality and quantity of services they both want and deserve, while gold-plated pension pots are relegated to the back of the queue.
