Councils in England in crisis as Birmingham ‘declares itself bankrupt’ | Hacker News Reader

Councils in England in crisis as Birmingham ‘declares itself bankrupt’

theguardian.com

45 pointslsllc80 comments

As an outsider, it is rather hilarious that the top two responses to this story right now on HN are:

* Our own local council in the South of England, BCP is in the doghouse too. We have extraordinary inequality of taxation at the root of it. We have some of the wealthiest areas in Europe, like Sandbanks where every house is a mansion with it's own private beach, but we still cant fill the potholes in roads in the poorest areas. So sad that they lack the courage to put basic policies in order.

and

* Guaranteed the only way they’ll think will solve the issue is higher taxes. The uk has run out of ideas and the only option seems to be taking people’s money away.

I mean, they are both kind of true. The only thing palatable to the government is to raise income taxes. They won't dare touch capital gain tax or property tax - which is where the vast majority of wealth is concentrated. Income tax is absolutely brutal in this country, with the 100k cliff for example. It's very hard to accumulate wealth via salary.

Both are true. Property taxes haven't been re-assessed since the 90s. A minority of wealthy landowners are subsidized by a much larger group of salaried renters.

>Property taxes haven't been re-assessed since the 90s.

Whilst technically true that doesn't mean that council tax hasn't increased since the 90s.

Yeah but that makes it worse, doesn't it? The benefits to being under-assessed compound year on year, as do the costs of being over-assessed.

Well you can challenge the assessment (within 6 months of moving in I think).

Can you challenge other peoples assessments? Because that's what's needed.

Why is that needed?

I don't know anything about limey tax law, but just reading this thread makes the point very clear: somebody thinks that property taxes are too low across the board, and have been made up for with other taxes (presumably head or consumption taxes) that impact working people more than property taxes, which scale roughly with wealth. If you agree that this is the problem, challenging your own assessment doesn't solve anything unless you are one of the rich property owners who are underpaying. Even then, you'd also need to reduce the non-property (the head or consumption taxes) portion of taxes in order to relieve the burden on working people.

The obvious implication is that there are large properties that have appreciated greatly in value but have not been re-assessed, leading to artificially low property tax on those properties that haven't changed hands in thirty years while those who purchased since that time are re-assessed at purchase. Not dissimilar to Prop 13 in California: a massive one-time gift to those who owned in the area at the time (and, in California, their descendants).

because it would slow down the unjust concentration of land ownership into fewer and fewer hands.

Well yes, there are ways of increasing tax revenue without increasing tax percentages. For instance, by increasing economic activity. The more the money circulates the more vat gets collected. The more money people earn the more income tax they pay. Instead by just increasing % makes everyone poorer and economic activity slower. People demanding more tax on capital gains and property are people that have neither and never will if those taxes increase.

Our own local council in the South of England, BCP is in the doghouse too. We have extraordinary inequality of taxation at the root of it. We have some of the wealthiest areas in Europe, like Sandbanks where every house is a mansion with it's own private beach, but we still cant fill the potholes in roads in the poorest areas. So sad that they lack the courage to put basic policies in order.

The roads in many areas of England that I visit are like those found in war zones.

When visiting england recently, the main problem seemed to be that both red labour and “blue labour” have essentially the same policies regarding regulation (more is better) and taxation (more is better), the only difference is deciding who pays the increased taxes, the poor or the rich. The idea of actually stimulating wealth creation, and then taxing it instead of taxing and regulating it into oblivion seems to have slipped everybody’s minds…

I feel we should only be able to elect tourists to the Parliament, Congress, Bundestag, etc. They always seem to know how to diagnose problems and run the nation better than people who've been living there for years!

> The idea of actually stimulating wealth creation, and then taxing it

The problem is, the UK has not actually been responsible for a lot of the minutia of running it's self, as it imported a bunch of regulation from the EU, which touched everything.

Now, whilst we were in the single market, that worked reasonably well for us. Cheap skilled labour to plug our massive skills gap, lots of low tarrif countries to export to (although a lot of our exports are/were services which had higher barriers.)

Now, 2007 came and that gave everyone an austerity fetish. The problem is that all of that reform and infrastructure that requires maintenance is now reaching end of life, but as its not been carried out for >10 years its all breaking at once.

> What could we do to stimulate the economy?

negotiate a real trade deal with the EU, our closest and biggest partner.

However that means admitting that the _way_ brexit was handled was wrong, buy all sides. The remainers were against _any_ change, which meant that the first deal was voted down, causing us to leave the customs union and sort of single market.

the brexiters couldn't handle any kind of compromise on "hard" brexit, and the backstop was the antichrist, because sovereignty, teaming up with the hardcore remainers to block the aforementioned deal (all be it for very different reasons)

Thus we were left with the shit that johnson cooked up in the brief moments between naps, fucking his mistress, and selling access/assets/secrets to renovate his apartment (amongst other things)

So we are now left with the odd situation where everyone knows, and largely agrees that brexit has fucked the UK. However we _cannot_ admit that, because that means we were wrong, and therefore like vegetables to a three year old, we must blend, disguise and generally hide any kind of closer cooperation with the EU lest the press, gammons/FBPE(pro/anti brexit nutters on twitter) realise whats going on.

Liz Truss was voted into power on that platform, but was then unceremoniously booted out a few weeks later when she actually tried to implement it and the bond and currency markets had a wobble. If only they could have weathered the storm, things might look very different by now.

Voted into power by the Tory party membership, not the general electorship.

The problem Truss had was she was ignoring advice from the experts and proceeding based on faith. They couldn't weather the storm, they had already run aground and were about to break up on the rocks.

Not even that actually. Members aren't allowed to directly pick the party leader, they can only choose between two alternatives put to them by the MPs.

If the members directly elected party leaders it would be run by Kemi Badenoch, a black female conservative software engineer who when she was younger hacked the website of a Labour MP so it said nice things about the Tories.

Same story in The Register, but with more focus on failed IT projects:

https://news.ycombinator.com/item?id=37404350

Yes, that is apparently a contributing factor for Birmingham.

The Guardian describing how unions bankrupted a local authority, so that (potentially, if it was like the private sector) all workers will lose their jobs. Priceless.

Alternate take: describing how the unions held the local authority to account after illegally underpaying women for a long time, which the supreme court had already ruled they had to pay...

This one-liner fails to show the long-term finances of capital versus cash flows; fails to address the regulatory environment under which labor was provided; failed to include records of legal actions against any or all participants parties; essentially a political one-liner, which is strongly discouraged on this forum

If you know about the subject, I'd like to hear about capital versus cashflows.

I really don't know what our London borough's council does outside of garbage collection and passing school applications over to schools. Weeds overgrown on every footpath, litter all over the place. Oh they mow the local football pitch every blue moon. I pay 2500 pounds a year.

They should publish an annual report outlining the spend. You might be surprised at what they fund, or rather what central government doesn’t fund.

Nobody seems to sweep the roads or maintain the bike paths though.

Even as an accountant it is very hard to understand local authority accounts. They are usually three years late and poorly presented. Also most of their spend is either recharged to central government or mandatory; discretionary spend is a very small part of the budget.

By contrast, central government accounts in the UK are excellent.

So the local council has a shit tonne of things to payfor, but no real control on either raising taxes or defining how to deliver those services.

THey have a duty to:

provide social care (as in old people, homeless, disabled, orhpaned, etc)

Schooling (kinda)

large swathes of health care

planning

road maintenance

social housing

a whole bunch of red tape implementations.

However the actual execution is dictated by central government. Even the taxes you pay (council/buisness rates) are clawed back and redistributed. The local council has no real way to raise cash apart from cutting services, selling shit or risky investments.

The more I think about it the more I believe social care should be taken out of the hands of local councils. The demand for social care is effectively infinite, it will always crowd out other services.

yes. It needs national reform. It wont happen because its fucking expensive and a bit too socialist. (part of the reason May almost lost her majority was due to botched social care reform)

It seems to me, that May was more honest than most other politicians about social care reform, saying "if you want decent social care, let's not pretend it doesn't need paying for. Here's a proposal for how to fund it". Which IIRC included siphoning off some £ that would have otherwise been inherited, which to me seems reasonably fair, because getting much of an inheritance is a luxury that only a privileged portion of people receive. And in return the electorate said "f* off we're not paying". No wonder we're at a stalemate. Later, the Tories brought in the 1.5% social care levy on income. Which I throughly agree with as again, a reasonably fair way to fund this. Labour at the time opposed that claiming it was taxing the poorest. What does Labour want instead? More money in poor people's pockets but cr*p or non-existent social care instead? What's their proposal instead then? The social care levy lasted a few months before Truss ditched it. It seems to me the main parties have both failed miserably overall on social care and that they need to work together. Over the last few decades no gov't of either stripe has a decent record on it. Better that they make this non-partisan, de-politicise it, and agree not to fight each other's policies on it. Because at the mo' , people are having awful lives and dying of neglect (massive number of deaths of people with learning disability for example during covid), due to lack of funding for the sector. And the people working in the sector are getting paid less than supermarket staff and having to use food banks despite having full time jobs. And any person may at some time in their life need social care or someone they care about need it. Which is why is is staggeringly short-sighted of anyone to whinge about paying more tax to fund this. But that's apparently the position of the electorate as a whole. I despair in people, I really do.

Guaranteed the only way they’ll think will solve the issue is higher taxes. The uk has run out of ideas and the only option seems to be taking people’s money away.

The government has to tax to pay for things.

Birmingham has been legally constrained to raise taxes at a maximum of 5% per year, even with the massive inflation in the past few years. A 10% increase this year (what they are asking for) will still put them at an (inflation adjusted) lower tax rate than 2019.

I'm confused. Are Birmingham taxes levied in absolute units of currency, not as a % of income? Because if it's a % of income, then inflation is irrelevant, no?

It's a fixed amount. And hilariously outdated - it's based on property valuation in 1991. I pay more council tax on my modest home than some mega mansions in the area. The other silly thing about it is the tenant pays, not the owner.

Tax incidence likely means it doesn’t matter who the nominal payer of the tax is. In the present situation even though the renter pays 100% nominally they might not be paying 100% of the incidence and vice versa if the nominal tax fell on the owner.

Yes. British local taxation is banded (and deliberately regressive WRT property values) rather than proportional. It's a compromise between the old Rates (like a US millage) and the poll tax which Thatcher disastrously tried to introduce which had no property value component at all.

Further, rates are arbitrarily constrained by central government on a value for money and/or starve the beast basis. Councils are in theory free to raise taxes less than this, but in practice the maximum increase is way less than the annual increase in what it actually costs councils to provide services[0]. Coupled with an almost complete removal of government grants (which used to represent ~35% of council income) councils have been cutting everything that moves and still circling the drain. This has been going on since 2008. Every council issuing a Section 114 notice has its own local reasons for getting to this point now, but frankly the whole sector has been buggered.

TLDR: proposition 13, but imposed by central government instead of the voters, for all possible sources of income except user fees rather than just property taxes, and with no reduction in legal responsibilities to discharge.

[0]: The most expensive local government services are intrinsically staff heavy and so suffer from Baumol's Cost Disease. Teaching class sizes are basically limited to 30, for example, and require one qualified teacher each. Child protection is the other biggest expense.

Correct, local tax is not an income tax. You are charged a fixed amount based on how much the property you live in was worth in the 1990s. This is done in bands, not as a direct percentage of the property value.

Stop paying for things then.

Cut everything, and I do mean everything down to the bone.

Fire half of all government employees in every ministry tomorrow. Then a year from now fire half of the ones that are left. Stop hiring for the next 5 years.

Then stop providing any services that do not involve foreign relations/military/most public infrastructure.

Yes, I'm talking all those licensing requirements, NHS, welfare, etc... Eliminate them all tomorrow.

I can assure you that 10 years from now when the government is 1/10th of what it is today things will still be running.

> Then stop providing any services

See, the government in the UK has already stopped proving a good number of services. Policing is limited to extreme cases, schooling is meh, public healthcare is meh at best, and the list goes on. So where is all the tax money going?

Welfare.

Which they should stop.

It also has to spend money well, stimulate growth, and whole lot of other things than taking people's money away to patch things. The only option as it stands is privatising the NHS.

> The only option as it stands is privatising the NHS

So we have a shortage of doctors, nurses and hospital places.

Currently the state keeps a lid on costs because it sets the wages of about 1 million people nationally (more or less, its complicated, but doctors are paid in grades, and those levels are nominally set nationally, same with nurses, however scotland, wales and NI have some level of independence.)

We have huge pent up demand (7 million people on the waiting list)

And we have a limited and shrinking skilled workforce.

It takes a good 12 years to train a doctor. 6 to train a nurse.

what do you think will happen to wages when the whole thing is privatised?

Yeah, so privatising healthcare isn't going to make things cheaper. especially as the NHS is pretty cheap per head by EU standards.

Alternatively, Britain could go back to allowing Polish doctors in to make up for the lack of domestic medical personnel. That may require rejoining the EU, but probably not.

> The only option as it stands is privatising the NHS.

This is akin to political suicide though. Remember, the conservatives' Brexit battle cry was 300 million pounds for the NHS.

Well it’s either the NHS, the tories, or the country. Labour dont have a plan either. Taxing everyone to death is patchwork. The UK is in deep, deep, trouble and it ain’t the politics causing it. It’s the culture of making one bad choice after the other.

Between the three choices you mentioned, it's pretty obvious the Tories are going to take down the country before taking down either themselves or the NHS. Although in all fairness, the quality of service in the NHS has already gone down for both doctors and patients.

Can't do much about the demographics with the aging population. They probably can't or won't do much on the business/economy. Seems the only thing left to do is raise taxes, or cut services.

This is really a similar thing we're seeing in other countries with aging populations. Even look at the US social security - raise the tax to support it, or reduce the services.

The only way it will work in ideal world is to let the rich and old to cough out some shares to let the average young population to have better chances and willing to have more kids. But we will never reach that point

The young will leave for better pastures when they can, and when they can't, they'll just stop having kids and the locale will die out. Sad watching the old and wealthy choke the future to death, but that's humanity for you.

Taxation is not a problem. The only problem is who pays the taxes.

With inflation and the current cost of living, nobody making under 50k (100k in London) should be paying any.

The people at the top, who already only pay effectively single-digit percent rates of tax should be footing the bill and paying their fair share (technically if they were playing by the same rules the common working man is subject to, they should be paying ~50%).

Of course, those same people that are meant to be paying the tax are sliding checks to politicians' pockets to ensure this doesn't happen, or are the politicians themselves.

I'm guessing you're not UK based?

I am, and taxation is atrocious.

Agreed that taxation is atrocious. But the problem isn't taxation per-se but who pays the taxes.

Paying ~40% taxes at 100k, effectively ending up with 60k, which considering the current cost of living, insane rent crisis and general inflation, is a major problem.

Paying ~40% taxes on a few millions? I think that's fair and isn't going to inconvenience anyone or put them in a precarious situation.

Are taxes high and services/schools/hospitals so bad you need to pay privately?

The NHS (public healthcare), is unusable. They are taking the piss, having two hour lunch breaks at surgeries, pushing everyone towards main hospitals which are overcrowded. Schools are a gamble, it’s called the post code lottery - the masses obviously say the “rich” are sending kids private, but anyone who wants decent schooling goes private. Increased small business taxes, increased software contractor regulation, are literally killing the industry. Cities are going bankrupt due to mismanagement yet folks keep demanding tax hikes as if that’s going to fix the fundamental issues of this country. I’ve never seen the UK in such a bad state. Potholes everywhere while the government is yet to be held accountable for misspending money.

NHS have always been fine when I’ve needed them. They could not have done more for my dad during his cancer treatment.

Same for my MIL as she deals with arthritis. And my FIL for cataracts.

I have zero complaints.

I moved to Germany and it’s so much better here. I’m terrified of moving back to the UK because the quality of life is so much worse there across the board, particularly for healthcare and public services

what i've seen with the nhs is doctors avoiding care/exams in order to save ££ (i suspect as guidance from above). i've heard these takes on public schools but they failed to explain what's actually bad about them. could you provide more detail?

as for the sw contract industry, the way i see it more like closing a loophole where contractors were essentially working as permanent employees but ended up paying less taxes. outside ir35 contracts are a thing and the fact that there's less of those is probably an indicator that they were indeed used as a loophole.

tax hikes might help, it just depends on whom.

> what I've seen with the nhs is doctors avoiding care/exams in order to save ££

This happens in all healthcare. Depending on the insurance, and the incentives you either get loads of pointless investigations, or none.

There are three main problems with the NHS:

1) culture

2) no social care, meaning the the NHS is a medium stay care home

3) not enough staff (see 1)

(source, half of my friends are medical in one sort of another.)

For schools, objectively English schools are performing better than ever. https://wisevoter.com/country-rankings/education-rankings-by... (trying to find the specific link to the percentage improvement is hard)

However, without support this isn't going to last.

Private schools have the veneer of betterness because they are rich and have massive selection bias. For places like west sussex, there are an unusually high number of _shit_ private schools (the key is value added in the league tables)

> i've heard these takes on public schools but they failed to explain what's actually bad about them. could you provide more detail?

I'm also very interested to hear about this.

https://www.theguardian.com/education/2023/aug/20/private-sc...

Your kids likely to do better in a private school. Hard to say all public schools are bad, there are just fewer good ones and it depends where you live. It's like you either play a public/grammar school lottery or pay your dues.

Thanks for the link, but

A) from that link it's not possible to tell if there's causality between those two, and

B) it doesn't tell me what exactly is "bad" about the "bad schools", which is what I wanted to know.

Bad schools are generally in bad areas.

A few years ago, primary age students going into high school from my home village were going to be split between two secondary (or high) schools, as not every student could be accounted for in the closer school.

The closer school was a decent high school in an affluent town across from my village. Decent teachers, grades, no drama.

The other was a poorer high school in a rough and downtrodden town. The town has higher crime, including crime which reaches students (anti-social/troubled kids, more bullying, even cases of knives being brought into school).

This is a classic pattern in the UK. Well off/decent towns within spitting distance of formerly well-off towns which used to be industrially important and are now in stagnation, with poor job prospects, crime, anti-social behaviour, poor maintenance, nothing to do, and nothing to help.

Worse average grades, worse teachers (due to high turnover from teachers being pushed out by bullying), more potential to get in trouble, and worse life potential.

Not sure how this should be worded to not be construed in a funny way, but the kids from my village would have been the only white kids in the school in the rougher town, so you can imagine how that may amplify the effect the school would have on them.

Unsurprisingly, parents protested and many sold up and moved in order to avoid the "bad school" in question and get into a better school catchment area.

If you know West Yorkshire, you probably know exactly which towns I'm talking about. Such is the reputation of both towns and their respective schools.

Thank you for taking the time to write this, much appreciated.

Side note, I skimmed your comment history and I think we kind of think alike.

Poor funding, demographics, crime, academic underperformance.

There isn’t a consistent factor, just a combination of the above. Teacher pay and conditions are also worse in state schools.

I am a bit surprised to read this about the UK.

Is this everywhere or just in some regions?

Anyway, the issue is not the taxation but the misuse, then?

Tax hikes coupled with higher interest rates and an increased cost of living are making a dent. For software developer, contractors in particular - the only way to reach something that somewhat resembles US pay - are now subject to tightened regulation called IR35. Contracts "inside" IR53 are taxed just like regular pay even if done via an LTD and you can't claim expenses. This regulation is meant to catch disguised employees, but large clients don't want to risk it. In reality what's happening is that contract work is sent to outsourcing companies, one of which is the prime minister's wife's father Infosys. And that's one example. Outside tech there are all sorts of "traps": people's wages are increasing only to be caught up in higher tax brackets essentially meaning their pay is still low. Factoring in what I wrote about taxes, col, and interest raters, everyone is much poorer now than before. A lot of low income earners are squeaking about further tax hikes as if that's going to improve their lifes somehow. It's a crab mentality.

In regards to regions, it naturally varies, but overall the situation is the same everywhere. For instance, the second largest city just went bankrupt and I suppose those people are in for a ride. The region where I live, despite being the type that pays the tax so many yearn for, roads are filled with potholes, and the local surgery constantly complains about how much work they need to do. Friday, 2 PM it's closed for the weekend, and each day there's a two hour lunch break. You can't make this up.

But throughout schools, hospitals, complain about being understaffed, including private companies, yet when they try and increase wages to attract talent, said wages are immediately taxed. I can go on for ages, but something's way off about the country and it seems like a lot of factors are converging and forming a perfect storm.

Its not direct taxes that people is causing pain for those on lower income.

taxation for people on £250k is very different to those on £25k

Sure _graduates_ are feeling the pinch of tax. No, the cost of living is driven by three things:

Rent.

Staple inflation (food, basic travel, etc)

fucking fuel prices.

If you're outside of london and you are earning the average of £27k after tax its £1800 a month.

rent for a two bed place is between £850-1200 a month, thats going to go up

your heating is £250 a month (thats doubled )

your food bill has doubled

Your car insurance has gone up to £1k a year

Thats the real squeeze. Yes taxing them harder is bad.

However taxing someone on £250k a year a bit more, fine they can fucking take it.

removing the ridiculous contractor loophole where you can go from 45% income tax to <30% even if you earn megabucks is great.(hello IR35) Now increase captial gains tax.

Fun fact: when you take account of inflation, petrol's pretty cheap (135p in 2012 would be 184p today according to the BofE's inflation calculator - you get different results with different starting points of course, but it's hard to cherry-pick one that's that runs much above inflation over the same period). I reckon fuel costs feel worse now because salaries have flatlined.

> removing the ridiculous contractor loophole where you can go from 45% income tax to <30%

While paying your own holiday, insurance, employer's stamp, sick pay, pensions, bench time, etc. If you've got an in-demand skill and you're healthy I'd say it's definitely an improvement, but it's not quite as simple as comparing tax rates.

> While paying your own holiday, insurance, employer's stamp, sick pay, pensions, bench time, etc.

Whilst also being able to write of a bunch of things against tax (insurance, car, property if you're clever, loans etc etc etc). I am fully aware of how big the loophole used to be. Its also being abused to keep costs down at high turnover jobs as well. but that's another issue.

> If you've got an in-demand skill and you're healthy I'd say it's definitely an improvement, but it's not quite as simple as comparing tax rates.

Its entirely to do with tax minimisation, otherwise people wouldn't go through the faff of doing it? Why on earth would you give up employment rights and stability, just so you can have the privilege of doing accounts each year?

Its avoiding tax, something that low/middle earners aren't able to do/cost effective enough.

Local government has two sources of funds - money raised locally via taxation, and a grant from central government.

To take Birmingham as an example, the central government grant in 2010 was £1.125bn, but that had been reduced to £250m by 2020. Some of this was offset by locally retained business rates (£550m which previously went to central government) but there's still a shortfall of £525m (more when you account for inflation).

Local government has responded by cutting services to the bone, and focusing on those services that they are required by statute to provide. Some councils also took a shot at commercial property investment (they're barred from investing in residential property for ideological reasons). You can imagine how those investments are doing in the post-WFH world.

So over the past decade all the slack (and then some) has been removed from the system. So when something unexpected comes along (like a £760m equal pay award) it's the straw that breaks the camel's back. But the root cause is the decade of austerity we've just suffered. Cutting back even further isn't the answer.

Thank you for explaining what's actually going on. Groups like the "Taxpayers Alliance" (which is where I suspect our friend is getting their information from) are actually very right-wing, extreme libertarian think tanks pushing an agenda that's supposed to make people feel like taxation is unfair.

Personally, I don't actually pay myself particularly well but I still pay as much tax as I possibly can, even though I despise the current government. I claim none of the deductions I'm entitled to, and I still have enough to live comfortably.

The tories and austerity have spent more than a decade destroying this country.

Tufton Street. Meh.

When someone starts in on them I always ask if they've ever tried joining the Taxpayers Alliance.

This is exactly what it’s like.

Our NHS is literally close to collapse.

It can be a 2-3 week delay to see a GP if you jump through the hoops such as visiting a surgery to book at 8am.

For accident and emergency you can find yourself waiting for 8+ hours on a good day.

For operations you could be waiting for years. The number of people who die whilst on waiting lists is growing by the month.

I believe there are 7 million people on waiting lists.

Finding an NHS dentist is like unicorn hunting.

Paying privately is the only way to access healthcare.

There is no hyperbole in this post. These numbers are real across the vast majority of the country.

I could write the same about the police. There are whole classes of crime they have given up on. Usually the ones which aren’t revenue generating.

Our government is a shit show.

One clown after another, sending billions to their mates for failed projects or the US proxy war in Nulandistan, and the whole covid response was just a wealth transfer scheme.

I have no faith in any government or anyone that wishes to be in government. They are all the same, no matter the colour of their tie.

https://youtu.be/wMykYSQaG_c

Labour has done this to the Slough council too

Reply on news.ycombinator.com