Fight or privatise: A tale of two councils

Councils across the country are currently setting their budgets. Whether Tory, Lib Dem or Labour, they all dutifully carry out the government's cuts.

Socialists and anti-cuts campaigners call on them to defend the communities they represent and point to the record of the socialist-led Liverpool council in the 1980s.

Former Liverpool city councillor Tony Mulhearn answers some of the slurs thrown at the 1983-87 council's record.

Clive Heemskerk shows how privatisation of council services is the real crime.

Liverpool's fighting 47

Right-wing politicians often besmirch the achievements of the 1983-87 Liverpool councillors, the '47'. They claim that Liverpool's financial problems were caused by irresponsible borrowing which left the city in debt in 1987 and which successive administrations had to resolve.

This argument is false. Listening to these arguments, you could possibly believe that Liverpool was the only local authority that borrowed money. The practice is universal, it is the only way local authorities can function, in fact capitalism itself functions on borrowing large chunks of finance for revenue and investment purposes.

When the Liverpool 47 took office in 1983 they faced a catastrophe, inheriting a historic debt of £150 million created by the previous Liberal/Tory alliance's financial recklessness and £10 million of unallocated cuts.

This was compounded by then prime minister Thatcher's policy of savage cuts in the government's Rate Support Grant (RSG) to the council of £30 million. The RSG was conditional on staying within government spending limits, any expenditure over these limits was penalised by losing £2 for every £1 'overspend'.

The Liverpool 47's campaigning activity resulted in £60 million being clawed back from central government. With this more council houses were built than in all other local councils put together between 1983 and 1987. That was on top of the nursery classes, job creation and sports centres that were opened.

When the government cut off the cash supply in a vindictive act, Liverpool was compelled to borrow from foreign banks. Liverpool's present council leader Joe Anderson quotes a £100 million loan that cost £157 million. But all the money that Liverpool city council borrowed (for the capital programme) was at interest rates similar to those available to all councils throughout Britain.

Taking into account the 16,000 jobs created in a time of desperate unemployment and decent homes built for thousands of families (a permanent asset to the city) the case for value is irresistible.

In fact, when Thatcher's District Auditor surcharged the 47 councillors and removed them from office in 1987, the debt per head of Liverpool's population was roughly the same as all other major authorities in England and Wales.

The opponents of the Liverpool 47 never say what policies they would have suggested. The only answer which would have conformed with Thatcher's policies and pleased Kinnock and his acolytes would have been massive cuts in jobs and services, the abandonment of the house-building programme and the breaking of every election promise made by the council.

That may be the avenue favoured by the right wing and its media backers but such a move was decisively rejected by the 47 councillors.

Lewisham - relying on social enterprise

Clive Heemskerk

All councils borrow as part of their normal activity, and on much worse terms than those achieved by the Liverpool 47. While Liverpool council was fighting Thatcher's government for more resources for council house building, the 'moderate' Labour councillors in Lewisham, south London were contracting out their responsibilities.

In 1986 they made a deal with Hyde Housing Association to build and redevelop properties on the old St John's hospital site. Hyde borrowed £13.5 million, on a 50 year index-linked loan, and leased the 148 homes to Lewisham council for 20 years, with the rents collected to be used to make repayments on the loan.

Many details of the 1986 deal are still kept by the present Lewisham Labour councillors in secret 'part two' papers not available to the public. But the bottom line was that Lewisham council would be liable for St John's debts if Hyde refused to meet the loan repayments after the leases expired in December 2006.

And that's what happened. The outstanding balance on the original loan of £13.5 million in 1986 had become £28 million by 2006, even though Hyde had collected £37.8m (in 2006 prices) from Lewisham council over 20 years to meet its annual loan repayments! Lewisham's Labour executive mayor authorised council officers to borrow the money to meet the debts, without a full council vote.

As Ian Page and Chris Flood, then Socialist Party councillors in Lewisham, said when this came to light in 2006, at least it showed that councils' can borrow money when they are forced to! But our job is to force them to spend it on council services rather than their 'social enterprise' or private business friends.

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In The Socialist 21 March 2012:

Fighting the cuts

Tell the Con-Dem government: NO CUTS!