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Ending austerity: stop councils selling off public assets

The perverse outcomes of a decade of austerity in Britain are perhaps nowhere clearer to see than in relation to land ownership. Since austerity policies were introduced in the wake of the financial crisis, councils have sold off public land that is crucial to the public services they provide. But, at the same time, they are speculatively purchasing investment land and property – unconnected to public service delivery – in a bid to shore up their ailing budgets.

Public-sector bodies have been under pressure from central government to sell off land. Such pressure is not entirely new. It has existed to one degree or another since the beginning of the 1980s.

What’s new is the intensity of this pressure and the emphasis on a hitherto marginal rationale. Land is being sold off to raise income specifically to reduce the budget deficit. This is the perverse logic of austerity.

Pressure has been especially intense on local authorities, who have sold more than 12,000 sites just since 2014-15. And, as they have disposed of their landholdings, councils have struggled to satisfactorily provide a number of services that have historically been at the core of their operations. This includes youth centres, leisure facilities, allotments, farm tenancies and, last but not least, social housing – all of which need land.

Lots of social housing has been sold off. flickr, CC BY

Manchester City Council sold off 673 public properties between April 2014 and July 2018. This included a large amount of social housing, as well as community centres, care homes and schools. While this is the most extreme example of sell-offs, it’s a similar story for many councils around the country.

The madness of austerity

Meanwhile, local authorities have increasingly been buying other types of land. Not the same kinds of property they can use to provide important services for the community. But rather commercial investment property – most notably, shopping centres. This is all about austerity, too – and in two key respects.

First, austerity explains why councils have been doing this: to raise (rental) income in order to continue to be able to fund the provision of local services that have been imperilled by savage cuts in grants from central government as the latter has devolved austerity to the local level.

Second, austerity explains how councils have been doing this. As is now widely recognised, austerity in Britain has ushered in a lost decade of stunted growth. The Bank of England has accordingly maintained interest rates at historically low levels and local authorities have benefited from the availability of unprecedentedly cheap debt. They have borrowed prodigiously to finance their commercial property investment spree, with annual borrowing rocketing to £10 billion in 2017-18 from £4.4 billion four years earlier.

You don’t have to be particularly radical to believe that this state of affairs – councils selling land crucial to what they should be doing (such as providing social housing) while pursuing a land acquisition strategy well beyond their central remit (speculative investment in commercial property) – is absurd.

In 2016 alone, local councils spent more than £1 billion on business parks and shopping centres. Spelthorne Borough Council in Surrey, for example, spent £360m buying an office complex from BP, while Canterbury City Council in Kent made the first of two payments towards the £155m acquisition of a shopping centre.

This may be the new normal but these are bizarre decisions for local authorities. As FT journalist John Plender writes, it makes Spelthorne council more of “a property company with a sideline in providing local government services”. To paraphrase academic and author David Harvey, who has written of the madness that underpins a lot of mainstream economic reasoning, we might say that this is the madness of austerity reason writ large.

Reintroducing sanity

As a first step to reintroducing some sanity, the government should halt the austerity-augmented privatisation of public land. Not only is the income generated by disposal a one-off, non-recurring source of income. But it often removes a source of recurring public-sector income, as was the case with the privatisation of Network Rail’s commercial property portfolio.

Furthermore, there is growing evidence that public land acquired by the private sector is frequently hoarded rather than being used in a productive way – such as for the construction of truly affordable housing. And even where such land is put to use, there is zero evidence that this use leads to economic growth.

If Britain is to chart a navigable and fair route out of austerity, plotting a better path for the ownership and allocation of the ground beneath the nation’s feet is quite simply a political and strategic necessity.

This article is part of a series published in conjunction with the Progressive Economy Forum, in which economists put forward viable alternatives to austerity.

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