Home » Why Britain’s towns and cities are going bust

Why Britain’s towns and cities are going bust

Birmingham’s city center is thronged by empty lots with unfinished and unstarted building projects, like this one in the Deritend area.

In 1890, an American journalist named Julian Ralph traveled from New York to Birmingham, an industrial powerhouse lying squarely in the center of England, and found it to be “the best-governed city in the world.”

Over 12 breathless pages in Harper’s Magazine, Ralph praised the city council for providing its citizens with free museums, art galleries and libraries; with swimming pools and Turkish baths; for keeping its streets “uncommonly clean;” for managing its own water supply; and for using gas lamps — invented in the city some decades before — to keep its streets brightly lit.

In 2024, a visitor to Birmingham would find a very different public realm. The city council is considering selling its art galleries. It plans to close 25 libraries. Free swimming pools are long gone. Waste collection will become fortnightly. Its water, like its gas, was first nationalized, then privatized. And, in a desperate attempt to cut costs, the city has dimmed its streetlights.

Birmingham — the second-largest city in the United Kingdom, and the largest local authority in Europe — went bust last September. Unable to balance its yearly budget, it issued a “section 114” notice: the local government version of bankruptcy. To fill its financial black hole, the council will cut services, gut assets and raise taxes, making more than a million people pay more for less.

Birmingham’s Bull Ring Open Market, once the center of the city’s trade, has been neglected by the city council in favor of “prestige projects,” said local historian Carl Chinn.

People ride an escalator at the Library of Birmingham. The Birmingham City Council is considering selling assets such as libraries, country homes, private land and its share in the city’s airport.

Trash piles up outside a Birmingham restaurant. Waste in the city will be collected less often due to cost-cutting measures.

Some of its injuries were self-inflicted: the council, which is controlled by the main opposition Labour Party, failed to pay women and men in the same sort of jobs equally, and now must pay compensation. Coupled with the botched rollout of an IT system, the city has racked up debts of around £1 billion ($1.25 billion).

But other wounds came from outside: Birmingham’s funding from central Conservative government was slashed by a further £1 billion as part of its program of austerity in the decade from 2010, while demand for its services and the cost of providing them shot up. The council found itself caught in the “jaws of doom” — as budget pressures rose, grants from Westminster fell, causing two lines on a graph to diverge, resembling a crocodile’s mouth.

Birmingham — “Brum” to residents — was among the first to fall but its fate awaits many more of England’s towns and cities, as even the best-managed councils risk going under. From 1988 to 2018, just two councils went bust. Since 2018, eight have. More will follow: nearly one in 10 councils say they will likely declare bankruptcy this financial year. Half say they are likely to in the next five.

Britons in multiple regions will head to the ballot boxes on Thursday to vote in local elections. Or, rather, some will. Turnout at the last outing in 2021 was anemic: only 35% voted. Polls suggest those who do vote will deliver a drubbing to the ruling Conservative Party, which will then receive an even sharper drubbing at the upcoming general election, which must be held by January 2025. Looking out from Westminster, the next government will face a grim reality: one by one, Britain’s towns and cities risk going bust, as local crises congeal into a national catastrophe.

The campaign group “Brum, Rise Up!” meets at the Birmingham and Midland Institute.

‘Like an episode of Black Mirror’

The Birmingham and Midland Institute, a redbrick building in the city center, was praised by Ralph as a “great fount of education.” Opened in the mid-Victorian era, the Institute offered evening language, literature and science classes to Brummies, the city’s name for its residents.

On a recent grey morning in April, dozens of citizens had gathered in the Institute not for classes, but to protest deep cuts to Birmingham’s public services. The council announced in February how it planned to pull itself back from bankruptcy: over the next two years, services will be cut by £300 million, more than £1 billion of assets will be sold, and council tax — levied on households by local authorities to pay for services — will rise by 21%.

“These cuts are not just going to be hard, they’re going to devastate the city,” Kate Taylor told CNN. A schoolteacher by day, Taylor has by night rallied people who will be affected by the cuts — youth and social workers, musicians, trade unionists and more — into the campaign group “Brum, Rise Up!”

Taylor, whose son is autistic, has been affected by the cuts. Young people with special educational needs have long received support from the council, such as home-to-school transport in a dedicated minibus. But this has now been cut; young people have instead been provided with a bus pass. “For a young person with autism who needs consistency, it’s been really, really tough,” said Taylor.

Schoolteacher Kate Taylor speaks during a “Brum, Rise Up!” campaign meeting.

A woman takes notes during one of the breakout sessions after the main meeting.

People attend the campaign meeting, which was organized to protest deep cuts to Birmingham’s public services.

The building throbs with history. Its library was categorized by Joseph Priestley, a chemist often credited with coining the phrase “the greatest happiness for the greatest number.” That expression would become the seed of utilitarian ethics that would fuel the sweeping social reforms in Victorian England. The meeting was even held in the Dickens room — named after the great chronicler of the poverty those reforms worked to alleviate.

Speaking first at April’s meeting, Carl Chinn, a local historian who has lived in Birmingham his whole life, recalled a time when politicians thought it was their duty to “feed the hungry, clothe the naked and instruct the ignorant.” He fears those values are waning.

Speaker after speaker detailed the ways in which cuts will harm the fabric of the city. Gabriel Dyker, a violinist from the city’s symphony orchestra, said that a planned 100% cut to its council grant will force them to raise prices, keeping poorer audiences away. Dori Milman, a university student, reflecting on the closures of youth centers and other cultural spaces, asked, “What is there for me to do? Apart from, you know, drugs and alcohol?”

Nina Barbosa, a youth mental health worker, said the planned cuts to youth services were particularly galling. Despite receiving 80 referrals a day, she said only two or three young people will go on to receive mental health treatment; they simply don’t have the resources. The situation could worsen still.

Ruben Whitter recited a poem during the “Brum, Rise Up!” meeting, likening the council cuts to “iron bars slammed shut on all our imaginings.”

Nina Barbosa, who has worked in health care in Birmingham for 23 years, said the planned cuts to youth workers have been particularly galling.

Gabriel Dyker, a violinist from the city’s symphony orchestra, said that a planned 100% cut to its council grant will force them to raise prices, keeping poorer audiences away.

Birmingham historian Carl Chinn said the cuts would only breed more apathy. “People are worn out,” he said. There is a feeling of “whatever we do, it’s not going to make a difference.”

“I feel like it’s some kind of twisted joke. It feels like we’re living in an episode of ‘Black Mirror.’ This is the sixth richest country in the world, and in this city, 50% of children live below the poverty line. And we are seriously considering stripping more than 50% of the youth workers’ budget? This is insane,” she told CNN.

“These are already our most vulnerable young people. All we do is push them into criminality. And then all we do is destroy their lives. There is no possible future for them. They cannot be productive members of society. All that creativity and all that intelligence just gets wasted.”

‘Over the edge’

By international standards, English local government is feeble. In Britain less than 5% of taxes are collected locally. Other countries give local government more revenue-raising power: in France, 14% of taxes are raised locally; in Germany, 25%; in Sweden, 35%.

Unable to raise much of their own revenue, English councils often go cap-in-hand for grants from central government. But those grants were reduced by 40% in real terms between 2009-10 and 2019-20, the nadir. Central government injected more funds during the Covid-19 pandemic, meaning the fall in grant income in real terms by 2021-22 was 21%. But councils are still playing catch-up after more than a decade of underfunding.

To offset this, central government encouraged councils to engage in risky financial behavior. Councils were told to “make creative use of reserves,” including “invest-to-save projects.” With hindsight, the results were predictable: speculative investments in commercial property pushed councils into bankruptcy.

Pedestrians pass the Birmingham City Council House.

While their funding was cut, demand for their services rose. More people living longer, often sicker, lives ate up more and more of councils’ budgets. A decade ago, about 52% was spent on social care. Last year, it had risen to 61%. Cuts had to be made elsewhere. With the bulk of the budget going on a sliver of the population, most Britons are left wondering what they’re paying for: their bills go up and up as their streets get dirtier and services decline.

And as demand rose, so did costs — often at a rate far above national inflation. In 2017-18, Birmingham council told CNN it spent £20 million on home to-school transport for children with special educational needs. By 2021-22, the bill was £40 million.

“The cost of delivering our services has gone up,” John Cotton, leader of Birmingham council, told CNN. “It’s underfunding plus rising demand for services that’s really pushing councils towards and over the edge.”

About 100 miles north of Birmingham, in South Yorkshire, Barnsley council is not yet over the edge, but teetering close to it. Stephen Houghton, the council leader, says it hasn’t engaged in any “funny money” schemes — it’s just the blunt arithmetic of low revenues and high demand.

People walk past signage outside the Birmingham School of Art.

Birmingham, the second-largest city in England, went bust late last year.

“Very often in Westminster, while they are taking big policy decisions, they don’t necessarily see the direct impact of that. Whereas if I put someone’s council tax up or close a community center, I’m living next door to the people affected by that,” Houghton told CNN. He said he’s been verbally abused in the streets. “You really are at the sharp end of this.”

Houghton said he feels central government does not trust local government with funds. When the government in February announced a £600 million support package (meant to address a nationwide funding gap of £4 billion), it also asked for productivity plans. “They’re not giving us the money and trusting us to spend it,” Houghton said. “They want a plan back on what we’re going to do.”

Houghton was also frustrated by the process of bidding, along with several other councils, for small amounts of funding made available by the government. Councils often spend thousands hiring consultants to polish their bid, only for the funds to be given to another bidder.

A spokesperson for the the UK’s Department for Leveling Up, Housing and Communities (DLUHC), which is responsible for local government, told CNN it recognizes that councils are facing challenges, which is why it increased the funding available to them.

Members of the community regularly gather at Birmingham’s Handsworth Library on Soho Road.

Short-term thinking

When a council issues a section 114, it halts all spending except on essential services. Renovation plans are shelved. This is plain to see from the Horse Fair Mural in Birmingham’s city center. The 85-foot mosaic — created in 1966 as the city rebuilt itself after World War II — tells the story of its horse-trading past in brilliant Venetian glass.

But today, the mural is in a sorry state. Long neglected, chunks of the mosaic have fractured and flaked off, its figures reduced to ghouls in dull gemstones.

After Birmingham went bust, central government parachuted in commissioners to get its house in order. The DLUHC spokesman told CNN: “Birmingham City Council faces a unique financial situation following its failure to get a grip of the significant issues it faces and years of severe mismanagement. This is why commissioners were appointed in October 2023 to protect residents and taxpayers in the city.”

Max Caller, the lead commissioner, told CNN his job is to “present elected members with impossible choices. What I have to do is say, ‘They’re all impossible, but you have to choose.’”

A section of the Horse Fair mural is seen in disrepair. The 85-foot-long mosaic, created in 1966 by artist Kenneth Budd, tells the story of Birmingham’s horse-trading past.

Among the impossible choices is which assets to sell. The city owns about £2.4 billion worth of assets. Half of this value will have to be recouped, just to balance its books over the next two years. The task has earned Caller the nickname “Max the Axe.”

Libraries are at particular risk: a costly service to run, in expensive buildings to maintain. Emma Lochery, a mother of two, was outraged by the plan to close her local library in the King’s Heath suburb. The council is currently “consulting” residents; one option floated is that libraries can stay open if public volunteers run them.

“These are our libraries. How dare they close them? How dare they take our taxes and then ask us to run our own libraries?” Lochery said.

Ralph, in his 1890 report, said Birmingham’s libraries meant anybody in the city “has a chance to attain the highest rungs of the ladder of book-learning, dependent only upon his own ability and ambition.”

Rav Chohan, who lives down the street from Handsworth Library, remembers the excitement he felt getting his first library card and how he used to race through its books as a child, but fears children growing up now in the area will not have the same opportunities.

Handsworth Library is a designated warm space where people struggling to pay their energy bills can come to keep warm.

Rav Chohan lives down the street from Handsworth Library and fears that children growing up now will not have the same access to the books he once did.

Writer Liz Berry and her 10-year-old son, Tom. Cuts to libraries make her “deeply sad,” she told CNN. “Libraries are one of our most noble things as a society.”

“We may save £2 million in the short term, but we may cost ourselves many more millions in people who have lost out on a vital resource and therefore maybe don’t have literacy skills,” he said. Once the library is closed, he said it is unlikely the council will find money in future years to reopen it. “There will be a generation of people that will suffer as a result of this.”

Economists agree. Tony Travers, an expert in local government at the London School of Economics, told CNN that asset sales are poor practice. “It’s selling the family silver. If you’re forced to the pawnshop, it’s not a good sign, and effectively they’re at the pawnshop.”

‘We can’t do it all again’

The citizens of Birmingham “have always shared in the government of the city,” helping to breed “public-spirited” people, Ralph said.

But Chinn, the historian, said the cuts would only breed more apathy. “People are worn out,” he said. There is a feeling of “whatever we do, it’s not going to make a difference.”

Despite mistakes made in Birmingham by its Labour-led council, Brummies at the campaign meeting said they would be forgiving at the ballot box Thursday. “When people are trying to provide services on a shoestring, they make mistakes,” said Taylor, the teacher. “The government got us into this mess and it’s up to them to get us out of it.”

An attendee speaks during a “Brum, Rise Up!” meeting. Britons in England and Wales will head to the ballot boxes on Thursday to vote in local elections.

How that happens is not clear. Austerity, intended to be a brief period of belt-tightening after the 2008 financial crash, has instead become a nightmare from which Britain is struggling to wake. According to the government’s latest funding plans, the sickness is now expected to become the cure: further cuts to local government are scheduled for the years ahead.

English councils have long been told to do more with less. “You can do that for a while,” said Houghton, from Barnsley, “but the latest round of austerity comes on the back of 14 years of hardship. There isn’t a lot of fat on the bone anymore.”

After years of doing more with less, more towns and cities are finding themselves unable to do much at all, he sighed. “I would say to the government, we can’t do it all again.”