Title

WHITEHALL

Centralisation is not a cosy cocoon

When Detroit went bust it seemed to prove the riskiness of local self-government, says Jessica Studdert. But Birmingham going into effective bankruptcy 'should end any naive assumptions the Whitehall model provides anything like a safety net'.

Ten years ago, the city of Detroit went bust. The combination of lost tax revenues from a declining population and rising expenses meant the city government effectively ran out of cash. A court bankruptcy was filed, triggering negotiations for adjustments in its financial obligations and state and federal support packages.

At the time, the reaction this side of the Atlantic was a combination of bewilderment and reassurance. Bewilderment at the US model of highly devolved Government, which left a big city in the position of not being able to meet its own population's needs. Reassurance that in our own highly centralised context, nothing like this could ever happen here. 

The episode seemed to prove the inherent riskiness of fiscal devolution and local self-government. Far better to be wrapped in the cosy cocoon of centralisation. What our own local authorities lack in autonomy, they gain from the security of a heavily controlled national system. 

Fast forward to 2023, and the picture doesn't look quite as rosy. The news that our second biggest city has gone bankrupt should end any naïve assumptions the Whitehall model provides anything like a safety net for local areas. Birmingham's declaration of a section 114 notice follows a string of other councils signalling similar dire financial straits. While each has its own circumstances, the wider policy discussion is slowly moving on from pathologising individual councils towards asking deeper questions about the degree of risk central Government is systematically placing on its local counterparts.

Demand pressures on services are rising – particularly in a city like Birmingham where 42%  of the population live in poverty. But councils must set balanced budgets and have little control over what resources they can access. Even Birmingham's reasonable request for a tourist tax to supplement the Commonwealth Games last year was refused by Government, let alone wider measures to generate the resources it needs.

While the US represents an extreme model of devolution, we must recognise our own highly centralised position. Both create unreasonable risks. There is a happy medium which combines sufficient funding to meet demand and the capacity to generate wider revenues. Let's keep this on the agenda. 

Jessica Studdert is deputy chief executive at New Local

X – @jesstud
 

WHITEHALL

Britain's growth is constrained by having only one wealth-generating city

By Abdool Kara | 12 March 2026

Abdool Kara says: 'We need to do more to ensure that capital investment and value-adding workers are attracted elsewhere than the proverbial Big Smoke.'

WHITEHALL

Smarter payment strategies for public sector efficiency and control

By Linda Weston | 12 March 2026

All organisations – particularly public sector entities, local authorities, and government bodies – are keenly focused on improving efficiency. At the same t...

WHITEHALL

New boundaries, new politics?

By Duncan Flynn | 12 March 2026

As the sector awaits the Government’s decision on the boundaries for unitary authorities in the vanguard of reorganisation, Duncan Flynn looks at how the pot...

WHITEHALL

Adding up the damage

By Dan Peters | 12 March 2026

A cyber attack on Gloucester City Council has had lasting repercussions, leading to the need for exceptional financial support. Dan Peters reports.

Jessica Studdert

Popular articles by Jessica Studdert